Tag Archives: Money demand

On his blog, JP Koning argues that very short conversion periods rendered it unattractive for Swedes to hold cash. He also suggests that it were the banks that pushed for the short periods. While digital payments share some of the blame for the obsolescence of paper kronor, the Riksbank is also responsible. The Riksbank betrayed the Swedish cash-using public this decade by embarking on an aggressive note switch.  Had it chosen a more customer friendly approach, Swedes would be holding a...

On his blog, JP Koning argues that very short conversion periods rendered it unattractive for Swedes to hold cash. He also suggests that it were the banks that pushed for the short periods. While digital payments share some of the blame for the obsolescence of paper kronor, the Riksbank is also responsible. The Riksbank betrayed the Swedish cash-using public this decade by embarking on an aggressive note switch.  Had it chosen a more customer friendly approach, Swedes would be holding a...

On VoxEU, Clemens Jobst and Helmut Stix argue that … cash balances for transactions comprise only a modest share of overall cash demand (a rough estimate of 15% might be a good guess across richer economies). … changes in currency in circulation are dominated by motives like hoarding. While transaction demand is reasonably well researched … still too little is known about non-transaction demand in general, and recent increases in particular.

On VoxEU, Luca Benati, Robert Lucas, Juan Pablo Nicolini, and Warren Weber argue that long-run money demand in many countries is rather stable. … using a specific, narrow monetary aggregate, M1, we study a dataset comprising 32 countries since the mid-19th century (Benati et al. 2016). The main finding of this large-scale investigation is that, contrary to conventional wisdom, in most cases statistical tests do identify with high confidence a long-run equilibrium relationship between...

On his blog, J P Koning discusses Kenneth Rogoff’s proposal to abolish high denomination notes (discussed earlier). Koning concludes: I agree with Rogoff’s general point that it makes sense to burden cash users with ever more work since this burden disproportionately falls on heavy users like criminals. But Rogoff hasn’t yet convinced me that the status quo policy of gradually increasing the workload involved in cash usage (via inflation) needs to be sped up by a sudden removal of every...

In a recent NBER working paper, Luca Benati, Robert E. Lucas, Jr., Juan Pablo Nicolini, and Warren Weber report estimates of long-term money demand. They write: [U]sing annual data on money (M1, for us), nominal GDP, and short term interest rates from 31 countries over periods that range in some cases to over 100 years. We find remarkable stability in long run money demand behavior in many countries, and an equally surprising sameness across different countries. In some cases of...