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The UK Personal Sector Demand for Risky Money

Author

Listed:
  • Binner, Jane

    () (University of Sheffield)

  • Elger, Thomas

    (Department of Economics, Lund University)

Abstract

This study compares the empirical performance of a capital certain Divisia index and an index that is extended to contain assets with substantial interest rate risk, such as unit trusts, within a cointegration money demand framework. Financial innovations have increased the liquidity of risky assets and recent developments in monetary aggregation theory have made it possible to account for interest rate risk in combination with risk aversion in the construction of monetary services indices. The coefficient estimates for both the capital certain and risky systems are consistent with theory and remarkably stable.

Suggested Citation

  • Binner, Jane & Elger, Thomas, 2002. "The UK Personal Sector Demand for Risky Money," Working Papers 2002:9, Lund University, Department of Economics.
  • Handle: RePEc:hhs:lunewp:2002_009
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hjelm, Goran & Johansson, Martin W., 2005. "A Monte Carlo study on the pitfalls in determining deterministic components in cointegrating models," Journal of Macroeconomics, Elsevier, vol. 27(4), pages 691-703, December.
    2. Elger, Thomas, 2002. "The Demand for Monetary Assets in the UK; a Locally Flexible Demand System Analysis," Working Papers 2002:6, Lund University, Department of Economics.
    3. Binner, Jane & Elger, Thomas & de Peretti, Philipe, 2002. "Is UK Risky Money Weakly Separable? A Stochastic Approach," Working Papers 2002:13, Lund University, Department of Economics.

    More about this item

    Keywords

    Divisia; Risk; Money Demand;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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