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The Determination of Liquid Asset Holdings of the U.K. Personal Sector

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  • Cuthbertson, Keith
  • Barlow, David

Abstract

The general-to-specific methodology and cointegration techniques are used to examine the demand for liquid assets by the UK personal sector. The demand for real liquid assets are found to depend positively on the level of transactions, the wealth to income ration and the own rate on liquid assets. In addition a higher rate of return on long-term securities or on bank lending reduces the level of liquid assets in the long run. Evidence in favour of cointegration between these variables is found and a dynamic error correction model with stable parameter estimates is found to hold over the 1970s and 1980s. The stable demand for this broad monetary aggregate however does not imply that it should form the basis for monetary targets since the equation is estimated from a regime that could be broadly characterised as one of interest rate setting. Copyright 1990 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Cuthbertson, Keith & Barlow, David, 1990. "The Determination of Liquid Asset Holdings of the U.K. Personal Sector," The Manchester School of Economic & Social Studies, University of Manchester, vol. 58(4), pages 348-360, December.
    • Handle: RePEc:bla:manch2:v:58:y:1990:i:4:p:348-60
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    Cited by:

    1. K Alec Chrystal & Paul Mizen, 2001. "Consumption, money and lending: a joint model for the UK household sector," Bank of England working papers 134, Bank of England.

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