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Portfolio Redistribution Impacts within the Narrow Monetary Aggregate

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  • Gauger, Jean

Abstract

A number of important monetary and financial changes occurred in the 1980s. A rising question among monetary economists is whether the character of M1 has changed substantially as a result. In particular, a frequent contention is that interest-bearing checkable deposits behave as a savings-type asset, thus subjecting M1 to portfolio redistribution effects in the modern era. This research examines the elasticities of substitution for a variety of financial assets pre- and post-1980. Results indicate that M1 subcomponents do show significant substitution with savings-type assets. However, the portfolio redistribution impacts are not confined to the interest-bearing checkable deposits. Further, results indicate that this behavior is not unique to the 1980s. Copyright 1992 by Ohio State University Press.

Suggested Citation

  • Gauger, Jean, 1992. "Portfolio Redistribution Impacts within the Narrow Monetary Aggregate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 239-257, May.
  • Handle: RePEc:mcb:jmoncb:v:24:y:1992:i:2:p:239-57
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    Cited by:

    1. Cysne, Rubens Penha & Turchick, David, 2010. "Welfare costs of inflation when interest-bearing deposits are disregarded: A calculation of the bias," Journal of Economic Dynamics and Control, Elsevier, vol. 34(6), pages 1015-1030, June.
    2. Choudhry Taufiq, 2002. "Financial Innovations And Demand For United States M1 And M2 Components," International Economic Journal, Taylor & Francis Journals, vol. 16(1), pages 73-93.
    3. Glennon, Dennis & Lane, Julia, 1996. "Financial innovation, new assets, and the behavior of money demand," Journal of Banking & Finance, Elsevier, vol. 20(2), pages 207-225, March.
    4. Yash P. Mehra, 1992. "In search of a stable, short-run M1 demand function," Economic Review, Federal Reserve Bank of Richmond, issue May, pages 9-23.

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