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Inflation, Hedging and the Demand for Money: Some Empirical Evidence

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  • Koskela, Erkki
  • Viren, Matti

Abstract

This paper explores the role of nominal rate of return uncertainty, and inflation hedging as factors explaining the pattern of money de mand. Using U.S. quarterly data over the period 1952II-1982IV, it is shown that in conformity with theoretical considerations the nominal rate of return-uncertainty variable tends to have a significantly pos itive effect and the inflation hedging variable (the covariance betwe en nominal rate of return and inflation rate) a significantly negativ e effect on the demand for money. These findings seem to be reasonabl y robust in terms of various definitions of variables as well as diff erent estimation methods. Copyright 1987 by Oxford University Press.

Suggested Citation

  • Koskela, Erkki & Viren, Matti, 1987. "Inflation, Hedging and the Demand for Money: Some Empirical Evidence," Economic Inquiry, Western Economic Association International, vol. 25(2), pages 251-265, April.
    • Handle: RePEc:oup:ecinqu:v:25:y:1987:i:2:p:251-65
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    Cited by:

    1. Koskela, Erkki & Virén, Matti, 1988. "Dynamics of the demand for money and uncertainty: The U.S. demand for money revisited," Bank of Finland Research Discussion Papers 4/1988, Bank of Finland.
    2. Virén, Matti, 1989. "Currency substitution, financial innovations and money demand," Research Discussion Papers 31/1989, Bank of Finland.
    3. Augustine C. Arize & Ali F. Darrat & Donald J. Meyer, 1990. "Capital Mobility, Monetization, and Money Demand in Developing Economies," The American Economist, Sage Publications, vol. 34(1), pages 69-75, March.
    4. Koskela, Erkki & Virén, Matti, 1988. "Dynamics of the demand for money and uncertainty : The U.S. demand for money revisited," Research Discussion Papers 4/1988, Bank of Finland.
    5. Virén, Matti, 1989. "Currency substitution, financial innovations and money demand," Bank of Finland Research Discussion Papers 31/1989, Bank of Finland.
    6. repec:zbw:bofrdp:1988_004 is not listed on IDEAS
    7. repec:zbw:bofrdp:1989_031 is not listed on IDEAS

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