On inflation and money demand in a portfolio model with shopping costs
Autor(a) principal: | |
---|---|
Data de Publicação: | 2014 |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/1822/30250 |
Resumo: | In this paper, we investigate the conditions under which expected inflation might influence the money demand, using a microeconomic model where the transactions of the representative agent are facilitated by its holdings of money. We assume that the agent holds a real asset, along with a range of nominal assets, that may include domestic money, foreign money, domestic bonds and foreign bonds. In this model, the optimal choice between money and bonds is embedded in a portfolio choice between the real asset and risky assets (the Merton problem). We show that, as long as the agent is not constrained in her holdings of bonds, the demand for domestic money will not, in general, depend on expected inflation. The demand for money may however become a positive function of the inflation rate in case the agent is constrained in her holdings of foreign bonds. The only case in which the demand for domestic money may depend negatively on the inflation rate is when the agent faces a binding constraint in her holdings of domestic bonds. |
id |
RCAP_c47f5d5bb9b84eca4ed4e249ff5c41eb |
---|---|
oai_identifier_str |
oai:repositorium.sdum.uminho.pt:1822/30250 |
network_acronym_str |
RCAP |
network_name_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository_id_str |
7160 |
spelling |
On inflation and money demand in a portfolio model with shopping costsMoney demandCurrency substitutionPortfolio TheoryCiências Sociais::Economia e GestãoIn this paper, we investigate the conditions under which expected inflation might influence the money demand, using a microeconomic model where the transactions of the representative agent are facilitated by its holdings of money. We assume that the agent holds a real asset, along with a range of nominal assets, that may include domestic money, foreign money, domestic bonds and foreign bonds. In this model, the optimal choice between money and bonds is embedded in a portfolio choice between the real asset and risky assets (the Merton problem). We show that, as long as the agent is not constrained in her holdings of bonds, the demand for domestic money will not, in general, depend on expected inflation. The demand for money may however become a positive function of the inflation rate in case the agent is constrained in her holdings of foreign bonds. The only case in which the demand for domestic money may depend negatively on the inflation rate is when the agent faces a binding constraint in her holdings of domestic bonds.COMPETE; QREN; FEDER; Fundação para a Ciência e a Tecnologia (FCT)Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)Universidade do MinhoFreitas, Miguel Lebre de20142014-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/1822/30250enghttp://www.nipe.eeg.uminho.pt/Uploads/WP_2014/NIPE_WP_13_2014.pdfinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-21T12:30:04Zoai:repositorium.sdum.uminho.pt:1822/30250Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T19:25:11.321282Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
On inflation and money demand in a portfolio model with shopping costs |
title |
On inflation and money demand in a portfolio model with shopping costs |
spellingShingle |
On inflation and money demand in a portfolio model with shopping costs Freitas, Miguel Lebre de Money demand Currency substitution Portfolio Theory Ciências Sociais::Economia e Gestão |
title_short |
On inflation and money demand in a portfolio model with shopping costs |
title_full |
On inflation and money demand in a portfolio model with shopping costs |
title_fullStr |
On inflation and money demand in a portfolio model with shopping costs |
title_full_unstemmed |
On inflation and money demand in a portfolio model with shopping costs |
title_sort |
On inflation and money demand in a portfolio model with shopping costs |
author |
Freitas, Miguel Lebre de |
author_facet |
Freitas, Miguel Lebre de |
author_role |
author |
dc.contributor.none.fl_str_mv |
Universidade do Minho |
dc.contributor.author.fl_str_mv |
Freitas, Miguel Lebre de |
dc.subject.por.fl_str_mv |
Money demand Currency substitution Portfolio Theory Ciências Sociais::Economia e Gestão |
topic |
Money demand Currency substitution Portfolio Theory Ciências Sociais::Economia e Gestão |
description |
In this paper, we investigate the conditions under which expected inflation might influence the money demand, using a microeconomic model where the transactions of the representative agent are facilitated by its holdings of money. We assume that the agent holds a real asset, along with a range of nominal assets, that may include domestic money, foreign money, domestic bonds and foreign bonds. In this model, the optimal choice between money and bonds is embedded in a portfolio choice between the real asset and risky assets (the Merton problem). We show that, as long as the agent is not constrained in her holdings of bonds, the demand for domestic money will not, in general, depend on expected inflation. The demand for money may however become a positive function of the inflation rate in case the agent is constrained in her holdings of foreign bonds. The only case in which the demand for domestic money may depend negatively on the inflation rate is when the agent faces a binding constraint in her holdings of domestic bonds. |
publishDate |
2014 |
dc.date.none.fl_str_mv |
2014 2014-01-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/1822/30250 |
url |
http://hdl.handle.net/1822/30250 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
http://www.nipe.eeg.uminho.pt/Uploads/WP_2014/NIPE_WP_13_2014.pdf |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE) |
publisher.none.fl_str_mv |
Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE) |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
repository.mail.fl_str_mv |
|
_version_ |
1799132734965153792 |