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Financial Market Risk and U.S. Money Demand

This paper examines empirically U.S. broad money demand emphasizing the role of financial market risk. We find that money demand rises with the liquidity risk of stock markets or the credit risk of corporate bond markets. After controlling for the effect of financial market risk, money demand become...

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Bibliographic Details
Main Author: Cook, David
Other Authors: Choi, Woon
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2007
Series:IMF Working Papers
Subjects:
Banks And Banking
Money
Monetary Economics
Financial Services Law & Regulation
Monetary Base
Market Risk
Financial Risk Management
Capital And Ownership Structure
Financial Markets
Financing Policy
Money And Monetary Policy
Demand For Money
General Financial Markets: General (includes Measurement And Data)
Liquidity Risk
Monetary Policy, Central Banking, And The Supply Of Money And Credit: General
Stock Markets
Money Supply
Finance
Finance: General
Value Of Firms
Financial Markets And The Macroeconomy
Goodwill
Stock Exchanges
Financial Risk And Risk Management
Financial Regulation And Supervision
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper examines empirically U.S. broad money demand emphasizing the role of financial market risk. We find that money demand rises with the liquidity risk of stock markets or the credit risk of corporate bond markets. After controlling for the effect of financial market risk, money demand becomes relatively stable over the last 35 years. At the sectoral level, household money holdings continue to be stable in a traditional model controlling for a decline in transactions costs for investing in mutual funds in the early 1990s. In contrast, business money holdings have been consistently (positively) associated with credit risk
Physical Description:33 pages
ISBN:9781451866537

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