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On the stability of money demand

  • Robert Lucas, Jr.

    (University of Chicago)

  • Juan Nicolini

    (Federal Reserve Bank of Minneapolis)

In this paper we consider a simple model of transactional assets management to evaluate the changes in banking regulation that passed between 1980 and 1982. The model implies that the newly created deposits in the US after the deregulation should be taken into account in the proper definition of money, in a way the model itself makes explicit. We show that once this is taken into account, the money demand equation characterized by Meltzer (1960) and Lucas (2000) remained remarkably stable.

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File URL: https://www.economicdynamics.org/meetpapers/2013/paper_353.pdf
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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 353.

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Date of creation: 2013
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Handle: RePEc:red:sed013:353
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Web page: http://www.EconomicDynamics.org/society.htm
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  1. Allan H. Meltzer, 1963. "The Demand for Money: The Evidence from the Time Series," Journal of Political Economy, University of Chicago Press, vol. 71, pages 219.
  2. Alvarez, Fernando & Lippi, Francesco, 2007. "Financial Innovation and the Transactions Demand for Cash," CEPR Discussion Papers 6472, C.E.P.R. Discussion Papers.
  3. Peter N. Ireland, 2008. "On the Welfare Cost of Inflation and the Recent Behavior of Money Demand," NBER Working Papers 14098, National Bureau of Economic Research, Inc.
  4. Samuel Reynard, 2004. "Financial Market Participation and the Apparent Instability of Money Demand," Working Papers 2004-01, Swiss National Bank.
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