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| Author: | Mulligan, C. |
| Title: | Extensive margins and the demand for money at low interest rates |
| Journal: | Journal of Political Economy
2000 : OCT, VOL. 108:5, p. 961-991 |
| Index terms: | DEALER SPREADS DEMAND MONEY |
| Language: | eng |
| Abstract: | The authors argue that the relevant monetary decision for the majority of U.S. households is not the fraction of assets to be held in interest-bearing form, but whether to hold any such assets at all. The authors show that the key variable governing the adoption decision is the product of the interest rate times the total amount of assets. This implies that the interest elasticity of household money demand at low interest rates can be estimated from the variation in asset holdings in a cross section of households rather than historical interest rate variations. |
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