IDEAS home Printed from
   My bibliography  Save this paper

Corporate cash hoarding in a model with liquidity constraints


  • Mazelis, Falk


This paper studies the role of uncertainty in the corporate cash hoarding puzzle. The baseline model is a stochastic neoclassical growth model featuring idiosyncratic and uninsurable technology shocks and a cash-in-advance constraint on new investments on the individual firm level. Individual agents' choices regarding cash holdings are analyzed and the effects of the introduction of a financial sector explored. The resulting aggregate cash holdings of households are non-optimal compared to the complete markets solution and aggregate excess cash increases with uncertainty. Aggregate consumption is also higher, but the added volatility of consumption decreases lifetime utility. Since cash holdings are usually managed by the financial sector, the results suggest a link between firm level risk and the behavior of the banking system.

Suggested Citation

  • Mazelis, Falk, 2014. "Corporate cash hoarding in a model with liquidity constraints," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100575, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc14:100575

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    More about this item

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc14:100575. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - Leibniz Information Centre for Economics). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.