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The Life-Cycle Motive and Money Demand: Further Evidence

Author

Listed:
  • Jan Tin

    (Commerce Department)

Abstract

This study takes a closer look at the relationship between money demand and the life-cycle motive using panel data from the Survey of Income and Program Participation. Findings indicate that the life-cycle motive exerts a direct impact on household demand for interest-earning monetary assets, but not on non-interest-earning checking deposits. The strength of the relationship, however, varies among households with divergent characteristics. There is no evidence of a unitary income elasticity for both interest- and non-interest-yielding monetary assets. The demand for interest-earning monetary assets is very sensitive to changes in the own rate of interest, but the interest rate elasticity for non-interest-earning checking accounts is quite small.

Suggested Citation

  • Jan Tin, 2008. "The Life-Cycle Motive and Money Demand: Further Evidence," Economics Bulletin, AccessEcon, vol. 5(18), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-07e40002
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    life-cycle motive;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E0 - Macroeconomics and Monetary Economics - - General

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