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A Structural Analysis of Money Demand: Cross-Sectional Evidence from Japan

Author

Listed:
  • Hiroshi Fujiki

    (Research Division 1, Institute for Monetary and Economic Studies, Bank of Japan)

  • Casey B. Mulligan

    (Department of Economics, University of Chicago)

Abstract

Following the study of U.S. regional data by Mulligan and Sala-i-Martin (1992) and the discussion by Fujiki and Mulligan (1996a) of empirical models of the demand for money, the paper uses Japanese prefectural data to estimate the parameters of a money demand function. The cross-sectional estimates of the income elasticity for a counterpart of M2 minus currency are in the range of 1.2-1.4 and appear stable over time. The cross-sectional income elasticities are used to estimate the interest rate elasticity of money demand from the macro time series data, and to assess changes over time in the degree of financial sophistication.

Suggested Citation

  • Hiroshi Fujiki & Casey B. Mulligan, 1996. "A Structural Analysis of Money Demand: Cross-Sectional Evidence from Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 14(2), pages 53-78, December.
    • Handle: RePEc:ime:imemes:v:14:y:1996:i:2:p:53-78
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    File URL: http://www.imes.boj.or.jp/research/papers/english/me14-2-3.pdf
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    Citations

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    Cited by:

    1. Fischer, Andreas M., 2007. "Measuring income elasticity for Swiss money demand: What do the cantons say about financial innovation?," European Economic Review, Elsevier, vol. 51(7), pages 1641-1660, October.
    2. Andreas M. Fischer & Lucca Zachmann, 2020. "Do the rich pay their taxes early?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(1), pages 194-214, February.
    3. Fischer, Andreas M., 2014. "Immigration And Large Banknotes," Macroeconomic Dynamics, Cambridge University Press, vol. 18(4), pages 899-919, June.
    4. Geoffrey R. Dunbar, 2019. "Demographics and the demand for currency," Empirical Economics, Springer, vol. 57(4), pages 1375-1409, October.
    5. Arnold, Ivo J.M. & Roelands, Sebastian, 2010. "The demand for euros," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 674-684, June.
    6. Sekine, Toshitaka, 1998. "Financial Liberalization, the Wealth Effect, and the Demand for Broad Money in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 16(1), pages 35-55, May.
    7. Mr. Subramanian S Sriram, 1999. "Survey of Literature on Demand for Money: Theoretical and Empirical Work with Special Reference to Error-Correction Models," IMF Working Papers 1999/064, International Monetary Fund.
    8. Hiroshi Fujiki & Cheng Hsiao, 2008. "Aggregate and Household Demand for Money: Evidence from the Public Opinion Survey on Household Financial Assets and Liabilities," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 26, pages 159-194, December.
    9. Fujiki, H., 1999. "Japanese money demand: evidence from regional monthly data1," Japan and the World Economy, Elsevier, vol. 11(3), pages 375-393, October.

    More about this item

    Keywords

    Demand for money; Monetary policy;

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