Premium
The Demand for Bank Reserves and Other Monetary Aggregates
Author(s) -
Gillman Max,
Kejak Michal
Publication year - 2004
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/cbh078
Subject(s) - economics , comparative statics , monetary economics , inflation tax , inflation (cosmology) , cash , bank reserves , demand for money , monetary base , speculative demand , demand deposit , microeconomics , reserve requirement , monetary policy , macroeconomics , central bank , physics , theoretical physics
The article 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 M 1‐type demand, and then includes exchange credit, yielding an M 2‐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.