The Janus model of money demand

We derive a new theoretical model of money demand, which reflects backward‐ and forward‐looking preferences in consumption and utility. The former aspect is captured by standard habit formation, and the latter by anticipation of future consumption preferences. By introducing both of these into the R...

Full description

Saved in:
Bibliographic Details
Published in:International journal of economic theory 2024-09, Vol.20 (3), p.334-351
Main Authors: Faria, João Ricardo, McAdam, Peter
Format: Article
Language:English
Subjects:
Consumption
future consumption
Habits
Money demand
Sidrauski
Citations: Items that this one cites
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We derive a new theoretical model of money demand, which reflects backward‐ and forward‐looking preferences in consumption and utility. The former aspect is captured by standard habit formation, and the latter by anticipation of future consumption preferences. By introducing both of these into the Ramsey–Sidrauski framework, we unveil a new highly general model of money demand. We discuss the model in light of the apparent breakdown of money‐demand functions and diminished policy relevance of monetary aggregates.
ISSN:1742-7355
1742-7363
DOI:10.1111/ijet.12400