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Endogenous Money Supply and Money Demand

Author

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  • Woon Gyu Choi
  • Seonghwan Oh

Abstract

This paper explores the behavior of money demand by explicitly accounting for the money supply endogeneity arising from endogenous monetary policy and financial innovations. Our theoretical analysis indicates that money supply factors matter in the money demand function when the money supply partially responds to money demand. Our empirical results with U.S. data provide strong evidence for the relevance of the policy stance to the demand for MI under a regime in which monetary policy is substantially endogenous. Specifically, we find that tighter monetary policy has substantial positive impacts on money demand under the recent Federal funds rate targeting.

Suggested Citation

  • Woon Gyu Choi & Seonghwan Oh, 2000. "Endogenous Money Supply and Money Demand," IMF Working Papers 2000/188, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2000/188
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    Citations

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    Cited by:

    1. Mr. Yungsan Kim & Woon Gyu Choi, 2001. "Has Inventory Investment Been Liquidity-Constrained? Evidence From U.S. Panel Data," IMF Working Papers 2001/122, International Monetary Fund.
    2. Agbola, Frank W. & Evans, Nigel, 2012. "Modelling rice and cotton acreage response in the Murray Darling Basin in Australia," Agricultural Systems, Elsevier, vol. 107(C), pages 74-82.
    3. Woon Gyu Choi & Mr. Yungsan Kim, 2001. "Monetary Policy and Corporate Liquid Asset Demand," IMF Working Papers 2001/177, International Monetary Fund.

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