The Demand for Bank Reserves and Other Monetary Aggregates

Central European University Economics Working Paper No. WP8/2003

37 Pages Posted: 9 Jan 2004

See all articles by Max Gillman

Max Gillman

Central European University (CEU) - Department of Economics

Michal Kejak

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: August, 13, 2003

Abstract

The paper starts with Haslag's (1998) model of the bank's demand for reserves and reformulates it with a cash-in-advance approach for both financial intermediary and consumer. This gives a demand for a base of cash plus reserves that is not sensitive to who gets the inflation tax transfer. It extends the model to formulate a demand for demand deposits, yielding an M1-type demand, and then includes exchange credit, yielding an M2-type demand. Based on the comparative statics of the model it provides an interpretation of the evidence on monetary aggregates. This explanation relies on the nominal interest as well as technology factors of the banking sector.

Keywords: Bank reserves, money demand, aggregates

JEL Classification: E31, E13, O42

Suggested Citation

Gillman, Max and Kejak, Michal, The Demand for Bank Reserves and Other Monetary Aggregates (August, 13, 2003). Central European University Economics Working Paper No. WP8/2003. Available at SSRN: https://ssrn.com/abstract=464560 or http://dx.doi.org/10.2139/ssrn.464560

Max Gillman

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary
+36 1 327 3227 (Phone)
+36 1 327 3232 (Fax)

Michal Kejak (Contact Author)

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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