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money demand and futures

Author

Listed:
  • Chiara Oldani

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

This paper introduces a micro-model of portfolio utility to look at the effects of futures in the allocation process, starting from Lancaster-type utility model (1991), further developed by Glennon and Lane (1996) on money demand; results underline the role of portfolio substitution and crowding out of inefficient financial assets. The synthetic model can be represented by money and financial innovation, lowering the dimension of the assets from 3 to 2. Statistical evidences confirm the validity of assumptions for the US economy at a static level.

Suggested Citation

  • Chiara Oldani, 2006. "money demand and futures," ISAE Working Papers 69, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    • Handle: RePEc:isa:wpaper:69
    as

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    File URL: http://lipari.istat.it/digibib/Working_Papers/WP_69_2006_Oldani.pdf
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    References listed on IDEAS

    as
    1. Paolo Savona & Aurelio Maccario & Chiara Oldani, 2000. "On Monetary Analysis of Derivatives," Open Economies Review, Springer, vol. 11(1), pages 149-175, August.
    2. Gary Gorton & Richard Rosen, 1995. "Banks and Derivatives," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 299-349, National Bureau of Economic Research, Inc.
    3. Glennon, Dennis & Lane, Julia, 1996. "Financial innovation, new assets, and the behavior of money demand," Journal of Banking & Finance, Elsevier, vol. 20(2), pages 207-225, March.
    4. Andrés, Javier & López-Salido, J David & Nelson, Edward, 2004. "Tobin's Imperfect Asset Substitution in Optimizing General Equilibrium," CEPR Discussion Papers 4336, C.E.P.R. Discussion Papers.
    5. Hsing , Yu & Chang, Hui S., 2003. "Testing the Portfolio Theory of Money Demand in the United States," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 56(1), pages 13-21.
    6. Ms. Catharina J. Hooyman, 1993. "The Use of Foreign Exchange Swaps by Central Banks: A Survey," IMF Working Papers 1993/064, International Monetary Fund.
    7. Peter A. Tinsley, 1998. "Short rate expectations, term premiums, and central bank use of derivatives to reduce policy uncertainty," Finance and Economics Discussion Series 1999-14, Board of Governors of the Federal Reserve System (U.S.).
    8. Jürgen Von Hagen & Ingo Fender, 1998. "Central Bank Policy in a More Perfect Financial System," Open Economies Review, Springer, vol. 9(1), pages 493-532, January.
    9. Ingo Fender, 2000. "Corporate hedging: the impact of financial derivatives on the broad credit channel of monetary policy," BIS Working Papers 94, Bank for International Settlements.
    10. Shastri, Kuldeep & Sultan, Jahangir & Tandon, Kishore, 1996. "The impact of the listing of options in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 15(1), pages 37-64, February.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    futures; money demand model; utility; substitution.;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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