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An empirical examination of the inventory-theoretic model of precautionary money demand

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  • Tin, Jan

Abstract

This study examines the empirical contents of precautionary demand for transactions money balances. Panel data are utilized to construct estimates of income variance. Regression results indicate that income uncertainty has a positive effect on precautionary money demand, but the magnitude of the elasticity of income variance falls far short of those suggested by economic theories.

Suggested Citation

  • Tin, Jan, 2008. "An empirical examination of the inventory-theoretic model of precautionary money demand," Economics Letters, Elsevier, vol. 99(1), pages 204-205, April.
    • Handle: RePEc:eee:ecolet:v:99:y:2008:i:1:p:204-205
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    References listed on IDEAS

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    1. Merton H. Miller & Daniel Orr, 1966. "A Model of the Demand for Money by Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(3), pages 413-435.
    2. Laidler, David, 1997. "Notes on the Microfoundations of Monetary Economics," Economic Journal, Royal Economic Society, vol. 107(443), pages 1213-1223, July.
    3. William A. Barnett, 2000. "Which Road Leads to Stable Money Demand?," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 577-592, Emerald Group Publishing Limited.
    4. Edward L. Whalen, 1966. "A Rationalization of the Precautionary Demand for Cash," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 314-324.
    5. Jacob A. Frenkel & Boyan Jovanovic, 1980. "On Transactions and Precautionary Demand for Money," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(1), pages 25-43.
    6. Judd, John P & Scadding, John L, 1982. "The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature," Journal of Economic Literature, American Economic Association, vol. 20(3), pages 993-1023, September.
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    Cited by:

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    2. Fischer, Andreas M., 2014. "Immigration And Large Banknotes," Macroeconomic Dynamics, Cambridge University Press, vol. 18(4), pages 899-919, June.
    3. Robert Calvert Jump, 2018. "Inequality And Aggregate Demand In The Is‐Lm And Is‐Mp Models," Bulletin of Economic Research, Wiley Blackwell, vol. 70(3), pages 269-276, July.

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