Journal of Political Economy Vol. 88 No. 3 1980
Money Demand Responsiveness to the Rate of Return on Money: A Methodological Critique
Abstract
This paper challenges the empirical basis for the current belief that competition forces banks to make immediate implicit-interest payments on demand deposits equal to the marginal earnings on those deposits and that this implicit return has a strong effect on the demand for money. Klein's method of defining the implicit return as a function of the money supply and of the return on an alternative asset and then adding that implicit return to a money-demand equation is likely to produce his results whether or not the world behaves as he hypothesizes.
- DOI
- 10.1086/260889
- Volume
- 88
- Issue
- 3
- Pages
- 598-607
- Language
- en
- Sources
- openalex crossref