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The puzzle with increasing money demand: Evidence from a cross-section of countries


  • Graf Lambsdorff, Johann


The ratio of money demand to GDP may increase with portfolio demand, monetization, and a deeper division of labor. Using a cross-section approach to money demand for 126 countries this study shows that the share of agriculture, life expectancy at birth, openness, and trust in the banking system capture a good deal of these influences. Once these variables are included, GNP per head negatively impacts on the ratio of money demand to GDP, which is in line with the standard result by Tobin and Baumol.

Suggested Citation

  • Graf Lambsdorff, Johann, 2004. "The puzzle with increasing money demand: Evidence from a cross-section of countries," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-28-04, University of Passau, Faculty of Business and Economics.
  • Handle: RePEc:zbw:upadvr:v2804

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    References listed on IDEAS

    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    2. Melitz, Jacques & Correa, Hector, 1970. "International Differences in Income Velocity," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 12-17, February.
    3. repec:hrv:faseco:30747160 is not listed on IDEAS
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    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models


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