IDEAS home Printed from https://ideas.repec.org/a/wly/jmoncb/v57y2025i2-3p663-676.html
   My bibliography  Save this article

Precautionary Money Demand in a Cash‐in‐Advance Model

Author

Listed:
  • SERGIO SALAS

Abstract

While numerous studies in monetary economics explore inflation, interest rates, stock returns, and money velocity, a model seamlessly linking these interactions remains elusive. One crucial omission in this literature is idiosyncratic precautionary money demand, a prominent feature in the data. This paper addresses this gap by presenting a simple model where precautionary money demand arises from heterogeneous household liquidity needs. Despite its intricate heterogeneity, the model allows straightforward aggregation, enabling analysis of its implications for household portfolios composed of cash, government bonds, and equities. The empirical analysis spans the period 1959.I–2022.I. Notably, the model captures crucial time‐series properties that models without the idiosyncratic element fail to achieve.

Suggested Citation

  • Sergio Salas, 2025. "Precautionary Money Demand in a Cash‐in‐Advance Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 57(2-3), pages 663-676, March.
    • Handle: RePEc:wly:jmoncb:v:57:y:2025:i:2-3:p:663-676
    DOI: 10.1111/jmcb.13131
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jmcb.13131
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jmcb.13131?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jmoncb:v:57:y:2025:i:2-3:p:663-676. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.