Production, Financial Sophistication, and the Demand for Money

with Hiroshi Fujiki


A framework for modeling the demand for money by households and firms is proposed. It allows for both endogenous and exogenous changes in the degree of financial sophistication as well as for multiple monetary assets. The framework is especially useful for interpreting and comparing the many empirical estimates of money demand, as it lists relationships among a variety of empirical and theoretical specifications. We consider a parametric version of the model, showing how the parameters are related to the behavior of various aggregate variables including the aggregate money demand of households, the aggregate demand of firms, and the aggregate national demand.

You cannot download a copy of this paper. It was published as:
Fujiki, Hiroshi and Casey B. Mulligan. "Production, Financial Sophistication, and the Demand for Money by Households and Firms." Bank of Japan Monetary and Economic Studies, 14(1), July 1996: 65-103.