Publication at Faculty of Social Sciences, Faculty of Mathematics and Physics, Centre for Economic Research and Graduate Education |
2004
Abstract
The article starts with Haslag´s (1998) model of the bank´s demand for reserves and reformulates it with a cash-in-advance approach for both financial intermediary and consumer. This gives a demand for a base of cash plus reserves that is not sensitive to who gets the inflation tax transfer.
It extends the model to formulate a demand for demand deposits, yielding an M1-type demand, and then includes exchange credit, yielding an M2-type demand. Based on the comparative statics of the model, it provides an interpretation of the evidence on monetary aggregates