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Sources of money instability

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Listed:
  • John V. Duca

Abstract

This article by John Duca discusses how shifts in technology, transactions, and asset preferences can weaken the relationships between monetary aggregates, the opportunity cost of money, and nominal output. Observed shifts in these general relationships are shown to be consistent with plausible changes in technology and preferences. Evidence indicates that technological advances have reduced the costs of shifting across assets and have lowered the precautionary need to hold monetary assets as a means of conducting transactions. Aside from technological changes, demographic and employment shifts have boosted the role of households in directing investments earmarked for funding their retirement and may have thereby increased their tolerance for investment risk. In turn, these factors may have induced households to shift their portfolios from monetary assets toward riskier assets with higher expected long-run yields.

Suggested Citation

  • John V. Duca, 1995. "Sources of money instability," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 2-13.
    • Handle: RePEc:fip:fedder:y:1995:i:qiv:p:2-13
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    References listed on IDEAS

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    1. Feldstein, Martin, 1995. "College Scholarship Rules and Private Saving," American Economic Review, American Economic Association, vol. 85(3), pages 552-566, June.
    2. Arthur B. Kennickell & Martha Starr-McCluer, 1994. "(Erratum) Changes in family finances from 1989 to 1992: evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Nov, pages 990-990.
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