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Monies and Banking

Author

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  • Anthony M. Santomero
  • John J. Seater

Abstract

This paper investigates the demand by households for transaction services from the financial sector. Households buy several goods with any of several media of exchange. The households choose the medium of exchange to use for each type of good, how much of each type of medium to hold, and the frequencies of commodity and financial transactions. The variety of financial services demanded by a household depends positively on the household's income, with households at the bottom of the income distribution demanding no financial services at all. Household demand for financial services also depends on how the household allocates its income among the available goods. Households with the same income but different allocations will demand different mixes of financial services. These results have several implications for the organization of the banking market, especially the location of bank branches, and the availability of banking services in different areas.

Suggested Citation

  • Anthony M. Santomero & John J. Seater, 1997. "Monies and Banking," Center for Financial Institutions Working Papers 97-11, Wharton School Center for Financial Institutions, University of Pennsylvania.
    • Handle: RePEc:wop:pennin:97-11
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    File URL: http://fic.wharton.upenn.edu/fic/papers/97/9711.pdf
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    References listed on IDEAS

    as
    1. Santomero, Anthony M & Seater, John J, 1996. "Alternative Monies and the Demand for Media of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 942-960, November.
    2. Santomero, Anthony M, 1974. "A Model of the Demand for Money by Households," Journal of Finance, American Finance Association, vol. 29(1), pages 89-102, March.
    3. Arthur B. Kennickell & Martha Starr-McCluer & Annika E. Sunden, 1997. "Family Finance in the U.S.: Recent Evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 83(1), pages .1-24, January.
    4. Romer, David, 1987. "The monetary transmission mechanism in a general equilibrium version of the baumol-tobin model," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 105-122, July.
    5. Mizrach, Bruce & Santomero, Anthony M., 1990. "A liquidity-in-advance model of the demand for money under price uncertainty," Journal of Monetary Economics, Elsevier, vol. 26(1), pages 143-159, August.
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    Cited by:

    1. Seater, John J., 2008. "The Demand for Currency Substitution," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-30.

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