Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/194019 
Year of Publication: 
2018
Series/Report no.: 
DEP (Socioeconomics) Discussion Papers - Macroeconomics and Finance Series No. 2/2018
Publisher: 
Hamburg University, Department Socioeconomics, Hamburg
Abstract: 
In this article we derive a microfounded model of money demand under uncertainty built on intertemporally optimizing risk-averse households. Deriving a complete solution of the optimization problem taking the intertemporal budget constraint into account where linearization procedures in our paper take a risky steady state as benchmark. The solution leads to ambiguous effects w.r.t. to the impact of capital market risk as well as inflation risk, which is due to the interplay of substitution and opposing income effects. The econometric results reveal that U.S. households increase their demand for money in response to positive changes in inflation risk and capital market risk, respectively, with both effects lasting permanently.
Subjects: 
Money Demand
Uncertainty
Inflation Risk
Capital Market Risk
Monetary Policy
Cointegration
JEL: 
C22
E41
E51
E58
G11
Document Type: 
Working Paper

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