Money in the Utility Function: an Empirical Implementation

This paper studies household asset demands by allowing certain assets to contribute directly to utility. It estimates the parameters of an aggregate utility function which includes both consumption and liquidity services.These liquidity services depend on the level of various asset stocks. We apply these estimates to investigate the long- and short-run interest elasticities of demand for money, time deposits, and Treasury bills. We also examine the impact of open market operations on interest rates, and present new estimates of the welfare cost of inflation.

[1]  William J. Baumol,et al.  The Transactions Demand for Cash: An Inventory Theoretic Approach , 1952 .

[2]  James Tobin,et al.  The Interest-Elasticity of Transactions Demand For Cash , 1956 .

[3]  James Tobin,et al.  Pitfalls in Financial Model-Building , 1968 .

[4]  T. R. Saving.  Transactions Costs and the Demand for Money , 1972 .

[5]  Tong Hun Lee.  On Measuring the Nearness of Near-Moneys: Comment , 1972 .

[6]  Stephen M. Goldfeld,et al.  The Demand for Money Revisited , 1973 .

[7]  E. Feige,et al.  The Substitutability of Money and Near-Monies: A Survey of the Time-Series Evidence , 1977 .

[8]  Â. Phlips.  The demand for leisure and money , 1978 .

[9]  Jerry A. Hausman,et al.  Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables , 1979 .

[10]  S. Fischer,et al.  Capital Accumulation on the Transition Path in a Monetary Optimizing Model , 1979 .

[11]  G. Calvo.  On Models of Money and Perfect Foresight , 1979 .

[12]  William A. Barnett,et al.  Economic monetary aggregates an application of index number and aggregation theory , 1980 .

[13]  M. Feldstein,et al.  The Effective Tax Rate and the Pretax Rate of Return , 1981 .

[14]  William A. Barnett,et al.  Consumer demand and labor supply: Goods, monetary assets, and time , 1981 .

[15]  L. Summers,et al.  Intertemporal Substitution in Macroeconomics , 1982 .

[16]  William A. Barnett,et al.  The Optimal Level of Monetary Aggregation , 1982 .

[17]  Boyan Jovanovic,et al.  Inflation and Welfare in the Steady State , 1982, Journal of Political Economy.

[18]  L. Hansen,et al.  Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models , 1982 .

[19]  Sanford J. Grossman,et al.  A Transactions Based Model of the Monetary Transmission Mechanism: Part 2 , 1982 .

[20]  M. Obstfeld.  The Capital Inflows Problem Revisited: a Stylized Model of Southern Cone Disinflation , 1984 .

[21]  Julio J. Rotemberg,et al.  A Monetary Equilibrium Model with Transactions Costs , 1982, Journal of Political Economy.

[22]  M. Obstfeld.  Multiple Stable Equilibria in an Optimizing Perfect-Foresight Model , 1984 .

[23]  Mark Rush,et al.  On measuring the nearness of near moneys revisited , 1984 .

[24]  D. Fisher,et al.  The Translog Utility Function and the Demand for Money in the United States , 1984 .

[25]  R. Mehra,et al.  THE EQUITY PREMIUM A Puzzle , 1985 .

[26]  D. Romer.  A Simple General Equilibrium Version of the Baumol-Tobin Model , 1986 .