Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/120852 
Year of Publication: 
2015
Series/Report no.: 
DEP (Socioeconomics) Discussion Papers - Macroeconomics and Finance Series No. 4/2015
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 leads to ambiguous effects w.r.t. to the impact of capital as well as inflation risk, thus contradicting standard results. We estimate both the long- and short-run model dynamics as well as potential time-variation by means of a rolling-window dynamic multiplier analysis using the error-correction framework for the U.S. economy between 1978q1 to 2013q4. The results reveal that U.S. households increase their demand for money in response to positive changes in inflation and stock market risks.
Subjects: 
Money Demand
Uncertainty
Inflation Risk
Stock Market Risk
Monetary Policy
ARDL Model
Cointegration
Dynamic Multiplier
Rolling-Window
JEL: 
C22
E41
E51
E58
G11
Document Type: 
Working Paper

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