Market intelligence gathering, asymmetric information, and the instability of money demand

Kim, Seon Tae and Marchesiani, Alessandro ORCID: 0000-0002-1866-6279 (2024) Market intelligence gathering, asymmetric information, and the instability of money demand. Economic Inquiry.

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Official URL: http://dx.doi.org/10.1111/ecin.13211

Abstract

<jats:title>Abstract</jats:title><jats:p>The observed money demand in the U.S. had a stable negative relation with the interest rate up until the 1990s. After this period, this relation fell apart and has never been restored. We show that the central bank's ability to gather information, referred to as market intelligence (MI), matters to generate an upward‐sloping money demand curve. We calibrate the model to the U.S. data for the period from 1990 to 2019 and show that MI helps to match the money demand. We also show that it is beneficial for the society, since it mitigates the inefficiency associated with asymmetric information.</jats:p>

Item Type:	Article
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	15 Dec 2023 16:15
Last Modified:	15 Apr 2024 19:56
DOI:	10.1111/ecin.13211
Related URLs:	Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3177445