Limited Commitment and the Demand for Money

Berentsen, A, Huber, S and Marchesiani, A ORCID: 0000-0002-1866-6279
(2017) Limited Commitment and the Demand for Money. Economic Journal, 128 (610). 1128 - 1156.

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Understanding money demand is important for our comprehension of macroeconomics and monetary policy. Its instability has made this a challenge. Common explications for the instability are financial regulations and financial innovations that shift the money demand function. We provide a complementary view by showing that a model where borrowers have limited commitment can significantly improve the fit between the theoretical money demand function and the data. Limited commitment can also explain why the ratio of credit to M1 is currently so low, despite that nominal interest rates are at their lowest recorded levels.

Item Type: Article
Depositing User: Symplectic Admin
Date Deposited: 15 Aug 2016 07:56
Last Modified: 16 Apr 2021 11:46
DOI: 10.1111/ecoj.12449
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