Substitution between monetary assets and consumer goods: New evidence on the monetary transmission mechanism

Drake, Leigh; Fleissig, Adrian R.

doi:10.1016/j.jbankfin.2010.06.002

Cited by 7 publications

(2 citation statements)

References 69 publications

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“…The bank pays interest on each type of deposit, based upon exogenous interest rates r D and r T. Note that the rate of interest is applied to the levels of deposits before sweeping, which is consistent with (Anderson, 1995). For evidence on the magnitude of this distortion and some of its effects and implications, see Dutkowsky and Cynamon (2003), Jones et al (2005), Dutkowsky et al (2006), Cynamon et al (2006), and Drake and Fleissig (2010). Ireland (2009) provides an application of sweep-adjusted money stock to examining the welfare cost of inflation and the stability of money demand.…”

Section: Bank Behavior With Sweepingmentioning

confidence: 99%

Interest on bank reserves and optimal sweeping

Dutkowsky

VanHoose

2011

Journal of Banking & Finance

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a b s t r a c tA key rationale offered by the Federal Reserve for the payment of interest on reserves was to remove the incentive for banks to operate sweep accounts. Sweeping shifts funds from transactions deposits subject to reserve requirements to non-reservable deposits. This paper extends a conventional banking model to analyze sweeping behavior. Sweeping responds positively to increases in bank loan rates and reserve ratios and negatively to increases in the interest rate on reserves or exogenous increases in bank equity. Sweeping generates greater responsiveness in lending to changes in loan rates or the interest rate on reserves and lower responsiveness to changes in reserve ratios or equity than in its absence. Empirical analysis of an explicit condition that we derive suggests that, with an unchanged reserve requirement, the Fed could eliminate sweeping by setting the interest rate on reserves to no less than approximately 4% points below the market loan rate.

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Section: Bank Behavior With Sweepingmentioning

confidence: 99%

Interest on bank reserves and optimal sweeping

Dutkowsky

VanHoose

2011

Journal of Banking & Finance

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“…This approach, introduced by Diewert (1971), has been widely used to investigate the interrelated problems of estimation of monetary asset demand functions and monetary aggregation issues. See, for example, Barnett (1983), Fisher (1984, 1985), Serletis and Robb (1986), Fisher and Barnett (1983) Minflex Laurent Ewis and Fisher (1984) Translog Ewis and Fisher (1985) Fourier Serletis and Robb (1986) Translog Serletis (1987Serletis ( , 1988 Translog Fisher andFleissig (1994, 1997) Fourier Fleissig (1997) Minflex, GL, Translog Fleissig and Swoflord (1996) AIM Drake, Fleissig, and Mullineux (1999) AIM Fleissig and Serletis (2002) Fourier Drake, Fleissig, and Swoflord (2003) AIM Drake and Fleissig (2004) Fourier Serletis and Shahmoradi (2005) AIM and Fourier Serletis and Shahmoradi (2007) GL, BTL, AIDS, Minflex, NQ Drake and Fleissig (2010) Fourier Serletis and Feng (2010) AIM…”

Section: Introductionmentioning

confidence: 99%

The Demand for Liquid Assets: Evidence From the Minflex Laurent Demand System With Conditionally Heteroskedastic Errors

Chang

Serletis

2018

Macroecon. Dynam.

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We investigate the demand for money and the degree of substitutability among monetary assets in the United States using the generalized Leontief and the Minflex Laurent (ML) models as suggested by Serletis and Shahmoradi (2007). In doing so, we merge the demand systems literature with the recent financial econometrics literature, relaxing the homoskedasticity assumption and instead assuming that the covariance matrix of the errors of flexible demand systems is time-varying. We also pay explicit attention to theoretical regularity, treating the curvature property as a maintained hypothesis. Our findings indicate that only the curvature constrained ML model with a Baba, Engle, Kraft, and Kroner (BEKK) specification for the conditional covariance matrix is able to generate inference consistent with theoretical regularity.

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U.K. household-sector money demand during Brexit and the pandemic

Fleissig

Jones

2023

Economic Modelling

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Substitution between monetary assets and consumer goods: New evidence on the monetary transmission mechanism

Cited by 7 publications

References 69 publications

Interest on bank reserves and optimal sweeping

Interest on bank reserves and optimal sweeping

The Demand for Liquid Assets: Evidence From the Minflex Laurent Demand System With Conditionally Heteroskedastic Errors

U.K. household-sector money demand during Brexit and the pandemic

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