Abstract
This part of the theory examines the desire to hold wealth and assets in the form of money balances by identifying the three motives for holding the medium of exchange in conjunction with saving. This will provide a clear description of the nature and origins of liquidity demand, which goes on to show it can be met by the various institutions providing time deposits, money and credit, exploring to what extent and under which conditions they are complements or substitutes. Once the scissors of supply and demand are applied to the ‘output’ of the banking sector, then the unregulated supply of loanable funds curve will appear as a crucial component of the model, which is the major theme of the next chapter.
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References and Further Reading
Baumol, W. J. (1952, November). The Transactions Demand for Cash: An Inventory Theoretic Approach. The Quarterly Journal of Economics, 66, 546–556.
Dowd, K. (1990, February). The Value of Time and the Transaction Demand for Money. Journal of Money, Credit and Banking, 22, 51–64.
Goodhart, C. (1989, June). The Conduct of Monetary Policy. Economic Journal, 99(396), 293–346.
Hendry, D. F., & Ericsson, N. R. (1983, October). Assertion Without Empirical Basis: An Econometric Appraisal of Monetary Trends in the United Kingdom, Milton Friedman and Anna Schwartz (Bank of England Panel of Academic Consultants, Panel Paper No. 22).
Laider, D. (1993). The Demand for Money: Theories, Evidence and Problems. New York: HarperCollins.
Tobin, J. (1956, August). The Interest-Elasticity of Transactions Demand for Cash. The Review of Economic Studies, 38, 241–247.
Whalen, E. L. (1996, May). A Rationalization of the Precautionary Demand for Cash. The Quarterly Journal of Economics, 80(2), 314–324.
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Thomas, D.G. (2018). The Demand for Money: Another Piece of the Jigsaw Puzzle. In: The Creators of Inside Money. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-90257-9_4
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DOI: https://doi.org/10.1007/978-3-319-90257-9_4
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