The Demand for Bank Reserves and Other Monetary Aggregates |
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| Authors: | Max Gillman Michal Kejak |
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| Institution: | Gillman:;Associate Professor, Central European University, Nador Utca 9, Budapest, Hungary, H1051. Phone 36–1–327–3227, Fax 36–1–327–3232, E-mail Kejak:;Assistant Professor, CERGE-EI (a joint workplace of the Center for Economic Research and Graduate Education, Charles University, and the Economics Institute of the Academy of Sciences of the Czech Republic), Prague, Czech Republic. Phone 420–2–2400–5186, Fax 420–2–2421–1374, E-mail |
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| 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 M 1-type demand, and then includes exchange credit, yielding an M 2-type demand. Based on the comparative statics of the model, it provides an interpretation of the evidence on monetary aggregates. This explanation relies on the nominal interest as well as technology factors of the banking sector. |
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