Enterprise demand for money and illiquidity crises in Yugoslavia

This paper examines the short-term demand for money by Yugoslav enterprises during the 1961–1971 period in an attempt to explain the recurrence of so-called ‘illiquidity crises’ in the Yugoslav economy. The empirical results indicate that a traditional transactions demand for money equation, modifie...

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Bibliographic Details
Published in:European economic review 1979-01, Vol.12 (1), p.53-71
Main Author: Laura, D'Andrea Tyson
Format: Article
Language:English
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Summary:This paper examines the short-term demand for money by Yugoslav enterprises during the 1961–1971 period in an attempt to explain the recurrence of so-called ‘illiquidity crises’ in the Yugoslav economy. The empirical results indicate that a traditional transactions demand for money equation, modified to allow for the effects of inflationary expectations and lagged adjustment, can explain the cash-holding behavior of the Yugoslav enterprise sector in the post-1965 period. Further examination of the evidence indicates that the decline in enterprise liquidity which occured during this period was also the result of enterprise response to the growth of money substitutes and the result of involuntary increases in holdings of trade credit occasioned by payments' defaults.
ISSN:0014-2921
1873-572X
DOI:10.1016/0014-2921(79)90012-6