The Demand for Currency in the United States

Journal of Money, Credit, and Banking, Vol. 20, No. 3, 1988

Federal Reserve Bank of Richmond Working Paper No. 86-1

46 Pages Posted: 24 Oct 2012

See all articles by Michael Dotsey

Michael Dotsey

Federal Reserve Bank of Philadelphia

Date Written: March 1, 1986

Abstract

The idea of totally deregulating the financial system and implementing monetary policy through currency control has received renewed attention. An important aspect concerning the desirability of using currency as the instrument of policy is the behavior of the demand for currency. If currency demand is not well behaved, then a policy of controlling the nominal supply of currency could produce drastic swings in the price level and interest rates. The adverse consequence of such effects could outweigh the benefits of deregulation. It is therefore crucial that the behavior of currency demand be well understood before unequivocally advocating total financial deregulation and currency control. This paper takes a step in that direction by analyzing the demand for currency over the period 1921-1980.

Suggested Citation

Dotsey, Michael, The Demand for Currency in the United States (March 1, 1986). Journal of Money, Credit, and Banking, Vol. 20, No. 3, 1988, Federal Reserve Bank of Richmond Working Paper No. 86-1, Available at SSRN: https://ssrn.com/abstract=2120849

Michael Dotsey (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
804-697-8201 (Phone)
804-697-8255 (Fax)

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