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Individual and aggregate money demands
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Resumo(s)
I construct a model in which money and bond holdings are consistent with
individual decisions and aggregate variables such as production and interest
rates. The agents are infinitely-lived, have constant-elasticity preferences, and
receive a fraction of their income in money. Each agent solves a Baumol-Tobin
money management problem. Markets are segmented because financial frictions
make agents trade bonds for money at different times. Trading frequency,
consumption, government decisions and prices are mutually consistent. An
increase in inflation, for example, implies higher trading frequency, more bonds
sold to account for seigniorage, and lower real balances.
Descrição
Palavras-chave
Money demand Cash management Inventory problem Market segmentation