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Should Buffer Stock Theorists be Broad or Narrow Minded? Some Answers from Aggregate UK Data: 1966–89

  • Paul Mizen
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Abstract

The concept of a buffer stock in the demand for money literature, as explained in Chapter 2, indicates that the individual is concerned to minimise the costs of adjustment of assets, the most costly to adjust being the most illiquid and the least costly being money, the perfectly liquid asset. Therefore the individual adjusts the stock of money assets when there are unexpected shocks to the portfolio in order to minimise the adjustment required amongst other less liquid assets. The crucial question for an empirical economist is how liquid must the relevant component assets of the money measure be for the aggregate to act as a buffering asset?

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© Paul Mizen 1994

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  • Paul Mizen

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