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.

[img] Text
EJ Final Revision 04_08_16.pdf - Accepted Version

Download (1MB)

Abstract

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
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/3002924