Household Demand for Money in Poland: Theory and Evidence

This paper examines the household demand for narrow money in Poland during the 1980s. At that time, there were shortages, but informal trade in both goods and foreign exchange was common, and holdings of foreign currency were substantial. Household money demand in this environment is first examined at the theoretical level: a representative household’s holding of domestic and foreign money is analyzed in a cash-in-advance model in which domestic currency is needed to purchase goods in the official shops while either domestic or foreign currency can be used in the black market. This model gives rise to a formulation of money demand which is then estimated using household-level data from 1979 to 1988.

[1]  Timothy D. Lane.  Inflation Stabilization and Economic Transformation in Poland; The First Year , 1991 .

[2]  A. Lahiri.  Yugoslav Inflation and Money , 1991, SSRN Electronic Journal.

[3]  M. Weitzman.  Price Distortion and Shortage Deformation, or What Happened to the Soap? , 1991 .

[4]  W. Charemza,et al.  Demand for Money in a Dual-Currency, Quantity-Constrained Economy: Hungary and Poland, 1956-1985 , 1990 .

[5]  Timothy D. Lane,et al.  Costly Portfolio Adjustment and the Short-run Demand for Money , 1990 .

[6]  S. Wijnbergen,et al.  Savings, Commodity Market Rationing, and the Real Rate of Interest in China , 1990 .

[7]  J. Kremers,et al.  Economic and Monetary Integration and the Aggregate Demand for Money in the EMS , 1990, SSRN Electronic Journal.

[8]  L. Podkaminer.  Macroeconomic disequilibria in centrally planned economies: Identifiability of econometric models based on the theory of household behavior under quantity constraints☆ , 1989 .

[9]  L. Podkaminer.  Disequilibrium in Poland's consumer markets: Further evidence on intermarket spillovers , 1988 .

[10]  Robert F. Engle,et al.  Forecasting and testing in co-integrated systems , 1987 .

[11]  D. Nuti.  HIDDEN AND REPRESSED INFLATION IN SOVIET-TYPE ECONOMIES: DEFINITIONS, MEASUREMENTS AND STABILISATION , 1986 .

[12]  R. Clarke,et al.  Inflation an the money supply in the Soviet economy , 1985 .

[13]  Erwin W. Heri.  The short-run demand for money in germany: Some caveats for empirical work , 1985 .

[14]  David F. Hendry,et al.  Monetary Economic Myth and Econometric Reality , 1985 .

[15]  Stephen Yeo,et al.  Macroeconomic Planning and Disequilibrium: Estimates for Poland, 1955-1980 , 1983 .

[16]  Robert E. Lucas,et al.  EQUILIBRIUM IN A PURE CURRENCY ECONOMY , 1980 .

[17]  Igor Birman.  The financial crisis in the USSR , 1980 .

[18]  L. Tyson.  Enterprise demand for money and illiquidity crises in Yugoslavia , 1979 .

[19]  A. Nagy,et al.  The Optimal Volume of Foreign Trade and the Exchange Rate , 1967 .