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Japanese Money Demand from the Regional Data: An Update and Some Additional Results

Author

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  • Hiroshi Fujiki

    (Director and Senior Economist, Institute for Monetary and Economic Studies (currently, Financial System and Bank Examination Department), Bank of Japan (E-mail: naohisa.hirakata@boj.or.jp))

Abstract

We cross-sectionally estimate the income elasticity of money demand using Japanese prefectural deposit statistics and Japanese prefectural accounts statistics from fiscal 1955 to 2009 based on the structural model of Fujiki and Mulligan (1996a). In doing so, we update the results of Fujiki and Mulligan (1996a) using a similar data set from fiscal 1955 to 1990. Our analyses using the sample period of the 1980s confirm the finding of Fujiki and Mulligan (1996b) that the cross- sectional income elasticities of the sum of demand deposits and interest- bearing deposits, similar to the M2 statistics, range from 1.2 to 1.4. Our analysis using the sample period after 1990 shows that the cross- sectional income elasticities decrease gradually over time, and reach the value of 0.93 in 2003. Our analysis using data from 2004 to 2009 shows that the cross-sectional income elasticities take a value from 0.6 to 0.7. These results, taken at face value, suggest that households and firms save the monetary inputs for their production activities over time: the additional demand for money for an additional unit of production activity increased by more than one unit by the 1990s, while it increased by less than one unit after 2000.

Suggested Citation

  • Hiroshi Fujiki, 2013. "Japanese Money Demand from the Regional Data: An Update and Some Additional Results," IMES Discussion Paper Series 13-E-04, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:13-e-04
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    References listed on IDEAS

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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