The Money-Age Distribution: Empirical Facts and Limited Monetary Models

46 Pages Posted: 27 Feb 2007

See all articles by Burkhard Heer

Burkhard Heer

University of Augsburg; CESifo (Center for Economic Studies and Ifo Institute)

Alfred Maussner

University of Augsburg - Faculty of Business and Economics

Paul D. McNelis

Georgetown University - Department of Economics

Date Written: February 2007

Abstract

The money-age distribution is hump-shaped for the US post-war economy. There is no clear cut relation between the variation of money holdings within generations and age. Furthermore, money is found to be only weakly correlated with both income and wealth. We analyze three motives for money demand in an overlapping generations model in order to explain these observations: 1) money in the utility, 2) an economy with costly credit service, and 3) limited participation. All three models are consistent with the hump-shaped relation between average money holdings and age, yet they predict a much closer association between money holdings, income, wealth, and age than we find in the data. Only the limited participation model partly replicates the low bivariate correlation between money and income as well as between money and interest bearing assets. None of the three models satisfactorily explains these stylized facts.

Keywords: money-age distribution, money demand, OLG model

JEL Classification: E41, E31, D30

Suggested Citation

Heer, Burkhard and Maussner, Alfred and McNelis, Paul D., The Money-Age Distribution: Empirical Facts and Limited Monetary Models (February 2007). CESifo Working Paper No. 1917. Available at SSRN: https://ssrn.com/abstract=965397

Burkhard Heer (Contact Author)

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Alfred Maussner

University of Augsburg - Faculty of Business and Economics ( email )

Universitaetsstr. 16
86135 Augsburg
Germany
+49 821 598 4187 (Phone)
+49 821 598 4231 (Fax)

Paul D. McNelis

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687 5573 (Phone)
202-687 6102 (Fax)

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