Abstract
We find strong evidence of a stable 'money demand' relationship for MZM and M2M through the 1990s. Though the M2 relation breaks down somewhere around 1990, evidence has been accumulating that the disturbance is well characterized as a permanent upward shift in M2 velocity, which began around 1990 and was largely over by 1994. Taken together, our results support the hypothesis that households permanently reallocated a portion of their wealth from time deposits to mutual funds. Although this reallocation may have been induced by depository restructuring, we argue that the substitution could be explained by appropriately measured opportunity cost.
Original language | English (US) |
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Pages (from-to) | 345-383 |
Number of pages | 39 |
Journal | Journal of Monetary Economics |
Volume | 46 |
Issue number | 2 |
DOIs | |
State | Published - Oct 2000 |
Keywords
- E41
- Money demand
- VECM
ASJC Scopus subject areas
- Finance
- Economics and Econometrics