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Overdrafts And The Demand For Money

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  • BAR-ILAN, A.

Abstract

This paper presents a stochastic analysis of the demand for interest-bearing money, such as NOW accounts, when overdrafting is allowed at some penalty rate. It is shown that the short-run interest elasticity of money demand is probably large (in absolute value) and negative, but in the long run this elasticity is much smaller or even positive. It is also argued that current definitions of the monetary aggregates, which exclude unused credit, may spuriously generate instability of money demand. An alternative definition of money stock is suggested and seems to be conceptually more satisfying. Copyright 1990 by American Economic Association.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bar-Ilan, A., 1988. "Overdrafts And The Demand For Money," Papers 34-88, Tel Aviv.
  • Handle: RePEc:fth:teavfo:34-88
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    Cited by:

    1. Bar-Ilan, Avner & Perry, David & Stadje, Wolfgang, 2004. "A generalized impulse control model of cash management," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1013-1033, March.
    2. Alvarez, Fernando & Lippi, Francesco, 2013. "The demand of liquid assets with uncertain lumpy expenditures," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 753-770.
    3. Bar-Ilan, Avner & Marion, Nancy, 2013. "Demand for cash with intra-period endogenous consumption," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2668-2678.
    4. John Ashton & Andros Gregoriou, 2014. "The role of implicit costs and product quality in determining the customer costs of using personal current accounts," Working Papers 14001, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    5. Baccarin, Stefano, 2009. "Optimal impulse control for a multidimensional cash management system with generalized cost functions," European Journal of Operational Research, Elsevier, vol. 196(1), pages 198-206, July.
    6. Bar-Ilan, Avner & Sulem, Agnes & Zanello, Alessandro, 2002. "Time-to-build and capacity choice," Journal of Economic Dynamics and Control, Elsevier, vol. 26(1), pages 69-98, January.
    7. Bar-Ilan, Avner & Ben-David, Nissim, 1996. "An algorithm for evaluating the number of controls in trigger--target models," Journal of Economic Dynamics and Control, Elsevier, vol. 20(8), pages 1367-1371, August.
    8. Youngsoo Bae & Robert M. de Jong, 2007. "Money demand function estimation by nonlinear cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(4), pages 767-793.
    9. Marc Fusaro, 2008. "Hidden Consumer Loans: An Analysis of Implicit Interest Rates on Bounced Checks," Journal of Family and Economic Issues, Springer, vol. 29(2), pages 251-263, June.
    10. Fusaro, Marc Anthony, 2010. "Are "bounced check loans" really loans? Theory, evidence and policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(4), pages 492-500, November.
    11. Avner Bar-Ilan, 2000. "Investment with an arithmetic process and lags," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 21(5), pages 203-206.
    12. Marc Fusaro, 2009. "The rank, stock, order and epidemic effects of technology adoption: an empirical study of bounce protection programs," The Journal of Technology Transfer, Springer, vol. 34(1), pages 24-42, February.
    13. repec:eee:moneco:v:90:y:2017:i:c:p:99-112 is not listed on IDEAS

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    Keywords

    money ; demand ; costs;

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