Modeling the effects on inflation on the demand for money

Inflation has a direct and indirect effect on the demand for money. Its direct effect is usually included in a short-term interest rate, however the cost of adjusting cash balances and the numerous alternatives for money may also affect the demand for money. The 1980s have shown that deregulation ha...

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Bibliographic Details
Published in:Economic review (Cleveland) 1991-03, p.17
Main Author: Emery, Kenneth M
Format: Article
Language:English
Subjects:
Demand deposit accounts
Economic indicators
Economy
Inflation
Interest Rates (deposits)
Monetary policy
Money supply
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Summary:Inflation has a direct and indirect effect on the demand for money. Its direct effect is usually included in a short-term interest rate, however the cost of adjusting cash balances and the numerous alternatives for money may also affect the demand for money. The 1980s have shown that deregulation has had a mixed effect on inflation and its relation to money demand. Money-demand models which did not include the direct effects of inflation did not perform well, however the use of money-demand models in the 1980s has shown that inflation may not be quite as important as previously believed.
ISSN:0013-0281
2163-372X