Money Demand Aggregates

Zhengyang Chen · Victor J. Valcarcel

This 2024 Macroeconomic Dynamics paper by Zhengyang Chen and Victor J. Valcarcel asks whether the long-documented instability of U.S.

Luca Benati

Building on the finding that the velocity of M1 is, to a close approximation, the permanent component of short-term nominal interest rates, this paper proposes estimating the natural rate of interest …

Maurice Allais

This 1966 American Economic Review paper by Maurice Allais asks whether the quantity theory of money can be given a single operational formulation that holds uniformly across normal times and …

Gu Jin · Tao Zhu

This paper applies a multiple-denomination commodity money model — building on Lee, Wallace, and Zhu (2005) — to coinage episodes in late medieval England, and derives two main findings. Shortages of …

William A. Barnett

This 1980 paper lays out the theoretical foundation for treating monetary aggregates such as M2 as genuine economic quantities and derives the Divisia index as the theoretically correct way to measure …

K. Alec Chrystal · Ronald MacDonald

This 1994 Federal Reserve Bank of St. Louis Review paper by K.

Robert E. Lucas, Jr.

Surveying and extending the Bailey-Friedman tradition of estimating the welfare cost of inflation, Lucas fits U.S. money-demand data for 1900-1994 and estimates that reducing annual inflation from 10 …

James Tobin

This 1958 Review of Economic Studies paper by James Tobin asks why investors hold non-interest-bearing cash at all, and derives the inverse relationship between aggregate money demand and the interest …

Michael T. Belongia

This 1996 Journal of Political Economy paper by Michael T. Belongia asks a narrow but consequential question: do the qualitative conclusions of recent monetary economics depend on whether money is …

Ricardo Lagos

The cashless-limiting result in Woodford (1998) — that as money velocity diverges the allocation of a monetary economy converges to that of the corresponding economy without money — is the theoretical …

John H. Cochrane

Cochrane argues that the fiscal theory of the price level rests on a valuation equation, not a budget constraint -- nominal government debt is priced like a claim on future government surpluses, …

Benjamin M. Friedman · Kenneth N. Kuttner

This 1992 American Economic Review paper by Benjamin Friedman and Kenneth Kuttner asks whether money remains a reliable indicator of future nominal and real activity, and whether the predictive …

Apostolos Serletis · Libo Xu

Measuring the welfare cost of inflation requires specifying a money demand function, a definition of money, and an approach to consumer surplus; existing estimates vary widely because these choices …

Karl Brunner

This 1961 American Economic Association Papers and Proceedings essay by Karl Brunner argues that evaluating monetary policy's effectiveness requires separately and rigorously assessing two distinct …

Edward Nelson

This 2003 Journal of Monetary Economics paper by Edward Nelson (Bank of England) asks whether the New Keynesian models that had displaced money-focused monetarist analysis by the early 2000s still …

James Tobin

This paper works out, with a simple mathematical model, whether the ordinary transactions demand for cash -- the money people hold just to bridge the gap between when they receive income and when they …

William J. Baumol

This 1952 Quarterly Journal of Economics paper by William J. Baumol applies inventory-control theory to the transactions demand for cash, modeling an individual who withdraws cash in evenly spaced …

J. Bradford De Long

Tracing the 20th-century history of "monetarism" through four successive subspecies, De Long argues that although monetarism's most politically influential and empirically fragile form collapsed in …

William A. Barnett

This 1978 Economics Letters paper by William A. Barnett asks what the correct price of holding a monetary asset actually is -- the "user cost" or equivalent rental price of the liquidity services a …

Robert E. Lucas, Jr.

Using quarterly U.S. money, price, and interest-rate data smoothed with a two-sided exponentially weighted moving-average filter, Lucas shows that once high-frequency "business cycle" noise is …