The Demand of Liquid Assets with Uncertain Lumpy Expenditures

69 Pages Posted: 16 Jun 2012 Last revised: 6 Feb 2021

See all articles by Fernando Alvarez

Fernando Alvarez

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Francesco Lippi

Università degli Studi di Sassari; Einaudi Institute for Economics and Finance (EIEF)

Date Written: June 2012

Abstract

We consider an inventory model for a liquid asset where the per-period net expenditures have two components: one that is frequent and small and another that is infrequent and large. We give a theoretical characterization of the optimal management of liquid asset as well as of the implied observable statistics. We use our characterization to interpret some aspects of households' currency management in Austria, as well as the management of demand deposits by a large sample of Italian investors.

Suggested Citation

Alvarez, Fernando and Lippi, Francesco, The Demand of Liquid Assets with Uncertain Lumpy Expenditures (June 2012). NBER Working Paper No. w18152, Available at SSRN: https://ssrn.com/abstract=2085139

Fernando Alvarez (Contact Author)

University of Chicago - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Francesco Lippi

Università degli Studi di Sassari ( email )

Piazza Universita
Sassari, 07100
Italy

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

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