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The money-age distribution: Empirical facts and economic modelling


  • Burkhard Heer

    (Free University of Bolzano)

  • Alfred Maussner

    (University of Augsburg)

  • Paul McNelis

    (Fordham University)


The money-age distribution is found to be hump-shaped for the US economy. The variation (inequality) of cash holdings within generations increases (declines) with age. Furthermore, cash holdings are found to be only weakly correlated ith both income and wealth. We analyze three motives for money demand in an overlapping generations model in order to explain this effect: 1) money in the utility, 2) an economy with costlyc credit service, and 3) limited participation. Both the simple money-in-the-utility model and the economy with the cash-credit goods are able to replicate the hump-shape profiles of cash holdings and its variation, but not the decreasing inequality within generations over age. In addition, we discuss the optimality of the Friedman rule in heterogeneous-agent economies. In the three models, zero inflation and zero nominal interest rates imply significant welfare losses

Suggested Citation

  • Burkhard Heer & Alfred Maussner & Paul McNelis, 2006. "The money-age distribution: Empirical facts and economic modelling," Computing in Economics and Finance 2006 191, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:191

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    References listed on IDEAS

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    Cited by:

    1. Yann Algan & Olivier Allais & Edouard Challe & Xavier Ragot, 2012. "Monetary Shocks Under Incomplete Markets," Sciences Po publications info:hdl:2441/1j0a1p4ifa9, Sciences Po.
    2. Burkhard Heer, 2013. "A note on the cyclical behaviour of the income distribution," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2013(1), pages 1-7.
    3. Olivier Allais & Yann Algan & Edouard Challe & Xavier Ragot, 2015. "The Welfare Cost Of Inflation Risk Under Imperfect Insurance," PSE Working Papers hal-01157168, HAL.
    4. Carlo A. Favero & Arie E. Gozluklu & Haoxi Yang, 2016. "Demographics and the Behavior of Interest Rates," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(4), pages 732-776, November.
    5. Yann Algan & Xavier Ragot, 2010. "Monetary policy with Heterogeneous Agents and Borrowing Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(2), pages 295-316, April.
    6. Heer, Burkhard & Süssmuth, Bernd, 2013. "Tax bracket creep and its effects on income distribution," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 393-408.
    7. Ragot, Xavier, 2014. "The case for a financial approach to money demand," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 94-107.
    8. Yaz Terajima & Jose-Victor Rios-Rull & Césaire Meh & Shutao Cao, 2013. "Demand for Liquidity and Welfare Cost of Inflation by Cohort and Age of Households," 2013 Meeting Papers 569, Society for Economic Dynamics.
    9. Hideki Konishi & Kozo Ueda, 2013. "Aging and Deflation from a Fiscal Perspective," IMES Discussion Paper Series 13-E-13, Institute for Monetary and Economic Studies, Bank of Japan.
    10. Larin, Benjamin, 2016. "Bubble-driven business cycles," Working Papers 143, University of Leipzig, Faculty of Economics and Management Science.
    11. Chang, Wen-ya & Chen, Ying-an & Chang, Juin-jen, 2013. "Growth and welfare effects of monetary policy with endogenous fertility," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 117-130.
    12. Yasuoka, Masaya, 2016. "Money and Pay-As-you-Go Pension," MPRA Paper 75578, University Library of Munich, Germany.

    More about this item


    Money-age distribution; money demand;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D30 - Microeconomics - - Distribution - - - General

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