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Money Demand, Consumer Demand and Relative Prices in Australia

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  • KENNETH W. CLEMENTS
  • PHUONG NGUYEN

Abstract

This paper develops a system‐wide model in which the consumer simultaneously allocates his income to money holdings and consumption. The model is estimated with annual Australian data and the results indicate that relative prices have a significant influence on money holdings. The results are used to decompose the rate of inflation into its. various components, the main ones being money supbly, real income and relative prices.

Suggested Citation

  • Kenneth W. Clements & Phuong Nguyen, 1980. "Money Demand, Consumer Demand and Relative Prices in Australia," The Economic Record, The Economic Society of Australia, vol. 56(155), pages 338-346, December.
    • Handle: RePEc:bla:ecorec:v:56:y:1980:i:155:p:338-346
    DOI: 10.1111/j.1475-4932.1980.tb01687.x
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    References listed on IDEAS

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    1. repec:bla:ecorec:v:52:y:1976:i:138:p:182-98 is not listed on IDEAS
    2. Dutton, Dean S & Gramm, William P, 1973. "Transactions Costs, the Wage Rate, and the Demand for Money," American Economic Review, American Economic Association, vol. 63(4), pages 652-665, September.
    3. Kenneth W. Clements, 1976. "A Linear Allocation of Spending‐Power System:A Consumer Demand and Portfolio Model," The Economic Record, The Economic Society of Australia, vol. 52(2), pages 182-198, June.
    4. Drazen, Allan, 1979. "The optimal rate of inflation revisited," Journal of Monetary Economics, Elsevier, vol. 5(2), pages 231-248, April.
    5. Karni, Edi, 1974. "The Value of Time and the Demand for Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(1), pages 45-64, February.
    6. Meisner, James F. & Clements, Kenneth W., 1979. "Specific complements and the demand for money in Australia," Economics Letters, Elsevier, vol. 3(3), pages 207-210.
    7. Saving, Thomas R, 1971. "Transactions Costs and the Demand for Money," American Economic Review, American Economic Association, vol. 61(3), pages 407-420, June.
    8. Grossman, Herschel I & Policano, Andrew J, 1975. "Money Balances, Commodity Inventories, and Inflationary Expectations," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1093-1112, December.
    9. Policano, Andrew J. & Choi, Eun Kwan, 1978. "The effects of relative price changes on the household's demand for money," Journal of Monetary Economics, Elsevier, vol. 4(4), pages 743-753, November.
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    Cited by:

    1. Truong P. Truong, 1985. "Inter‐Fuel and Inter‐Factor Substitution in NSW Manufacturing Industry," The Economic Record, The Economic Society of Australia, vol. 61(3), pages 644-653, September.
    2. Ellis W. Tallman & De-piao Tang & Ping Wang, 2001. "Anticipated Inflation, Real Disturbances and Money Demand: The Case of Chinese Hyperinflation, 1946-49," Vanderbilt University Department of Economics Working Papers 0134, Vanderbilt University Department of Economics, revised Dec 2001.
    3. Clements, Kenneth W. & Gao, Grace, 2015. "The Rotterdam demand model half a century on," Economic Modelling, Elsevier, vol. 49(C), pages 91-103.
    4. Ellis W. Tallman & De-Piao Tang & Ping Wang, 2003. "Nominal and Real Disturbances and Money Demand in Chinese Hyperinflation," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 234-249, April.
    5. E.J. Roberts, 1990. "The Demand for Meat: Part III," Economics Discussion / Working Papers 90-13, The University of Western Australia, Department of Economics.

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