Endogenous Money Supply and Money Demand

Author/Editor:

Woon Gyu Choi ; Seonghwan Oh

Publication Date:

November 1, 2000

Electronic Access:

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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.

Series:

Working Paper No. 00/188

Subject:

English

Publication Date:

November 1, 2000

ISBN/ISSN:

9781451859553/1018-5941

Stock No:

WPIEA1882000

Format:

Paper

Pages:

35

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