Financial Market Risk and U.S. Money Demand

 
Author/Editor: Choi, Woon Gyu ; Cook, David
 
Publication Date: April 01, 2007
 
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Summary: This paper examines empirically U.S. broad money demand emphasizing the role of financial market risk. We find that money demand rises with the liquidity risk of stock markets or the credit risk of corporate bond markets. After controlling for the effect of financial market risk, money demand becomes relatively stable over the last 35 years. At the sectoral level, household money holdings continue to be stable in a traditional model controlling for a decline in transactions costs for investing in mutual funds in the early 1990s. In contrast, business money holdings have been consistently (positively) associated with credit risk.
 
Series: Working Paper No. 07/89
Subject(s): Demand for money | United States | Capital markets | Credit risk | Liquidity | Money markets | Investment

Author's Keyword(s): Money demand | financial market risk | stock market liquidity | money market mutual funds
 
English
Publication Date: April 01, 2007
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2007089 Pages: 33
Price:
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