Endogenous Financial Innovation and the Demand for Money
This paper embeds two key ideas about the nature of financial innovation taken from the empirical literature into a familiar equilibrium monetary model. It provides formal support for several alternative econometric specifications for money demand that attempt to capture the effects of financial innovation and demonstrates that a popular theoretical model of money demand, when suitably modified, can account for some unusual monetary dynamics found in the data. Thus, it helps to establish both the theoretical relevance of recent empirical work and the empirical relevance of recent theoretical work on the demand for money. Copyright 1995 by Ohio State University Press.
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Volume (Year): 27 (1995)
Issue (Month): 1 (February)
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- Phillip Cagan & Anna J. Schwartz, 1987.
"Has the Growth of Money Substitutes Hindered Monetary Policy?,"
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- Jared Enzler & Lewis Johnson & John Paulus, 1976. "Some Problems of Money Demand," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(1), pages 261-282.
- Lieberman, Charles, 1977. "The Transactions Demand for Money and Technological Change," The Review of Economics and Statistics, MIT Press, vol. 59(3), pages 307-317, August.
- John B. Carlson & Sharon E. Parrott, 1991. "The demand for M2, opportunity cost, and financial change," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-11.
- Donald D. Hester, 1981. "Innovations and Monetary Control," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 141-200.
- Lawrence J. Christiano, 1991. "Modeling the liquidity effect of a money shock," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 3-34. Full references (including those not matched with items on IDEAS)
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