Endogenous Money Supply and Money Demand

November 1, 2000

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Format: Chicago

Woon Gyu Choi, and Seonghwan Oh. Endogenous Money Supply and Money Demand, (USA: International Monetary Fund, 2000) accessed December 3, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper explores the behavior of money demand by explicitly accounting for the money supply endogeneity arising from endogenous monetary policy and financial innovations. Our theoretical analysis indicates that money supply factors matter in the money demand function when the money supply partially responds to money demand. Our empirical results with U.S. data provide strong evidence for the relevance of the policy stance to the demand for MI under a regime in which monetary policy is substantially endogenous. Specifically, we find that tighter monetary policy has substantial positive impacts on money demand under the recent Federal funds rate targeting.

Subject: Demand for money, Econometric analysis, Financial services, Monetary base, Monetary policy, Monetary tightening, Money, Vector autoregression

Keywords: Demand for money, Financial Innovation, Financial service, First-half-period money demand, Funds rate, Monetary base, Monetary policy, Monetary Policy Stance, Monetary tightening, Money Demand, Money demand function, Money holding, Money stock, Money Supply Endogeneity, Money supply factor, Vector autoregression, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/188
Stock No:

WPIEA1882000
ISBN:

9781451859553
ISSN:

1018-5941

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