Financial Market Risk and U.S. Money Demand

WPIEA2007089 Image
Price:  $18.00

Author/Editor: David Cook, Woon Gyu Choi
Release Date: © April, 2007
ISBN : 978-1-45186-653-7
Stock #: WPIEA2007089
Stock Status: On back-order

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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.


Capital markets , Demand for money , Economic development , Economic policy , Financial institutions and markets , Investment , Monetary policy

More publications in this series: Working Papers

More publications by: David Cook ; Woon Gyu Choi