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Inflation and Portfolio Choice

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  • W. R. M. Perraudin

    (International Monetary Fund)

Abstract

To examine the impact of inflation on portfolio choice, this paper estimates a complete system of asset and liability demands for the U.K. nonbank private sector from 1976 through 1985. Among other results, it is found that higher inflation induces investors to take on more debt and to invest the proceeds in financial assets. In general, the pattern of substitution implied by the estimates seems intuitive and reasonable.

Suggested Citation

  • W. R. M. Perraudin, 1987. "Inflation and Portfolio Choice," IMF Staff Papers, Palgrave Macmillan, vol. 34(4), pages 739-759, December.
    • Handle: RePEc:pal:imfstp:v:34:y:1987:i:4:p:739-759
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    Cited by:

    1. Vukovic, Darko B. & Maiti, Moinak & Frömmel, Michael, 2022. "Inflation and portfolio selection," Finance Research Letters, Elsevier, vol. 50(C).
    2. D. Peter Broer & W. Jos Jansen, 1998. "Dynamic Portfolio Adjustment and Capital Controls: A Euler Equation Approach," Southern Economic Journal, John Wiley & Sons, vol. 64(4), pages 902-921, April.
    3. Christopher S. Adam, 1999. "Asset Portfolios and Credit Rationing: Evidence from Kenya," Economica, London School of Economics and Political Science, vol. 66(261), pages 97-117, February.
    4. Tomoe Moore & Christopher Green & Victor Murinde, 2005. "Portfolio Behaviour in a Flow of Funds Model for the Household Sector in India," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 675-702.
    5. Tomoe Moore & Christopher Green, 2005. "Other financial institutions' portfolio behaviour and policy implications: A study of India," International Economic Journal, Taylor & Francis Journals, vol. 19(4), pages 543-562.

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