publication . Preprint . 2000

Endogenous Money Supply and Money Demand

Woon Gyu Choi; Seonghwan Oh;
Open Access
  • Published: 01 Nov 2000
Abstract
This paper explores the behavior of money demand by explicitly accounting for the money supply endogeneity arising from endogenous monetary policy and financial innovations. Our theoretical analysis indicates that money supply factors matter in the money demand function when the money supply partially responds to money demand. Our empirical results with U.S. data provide strong evidence for the relevance of the policy stance to the demand for MI under a regime in which monetary policy is substantially endogenous. Specifically, we find that tighter monetary policy has substantial positive impacts on money demand under the recent Federal funds rate targeting.
Subjects
free text keywords: Demand for money;Economic models;Money supply;Monetary policy;Money Demand, Money Supply Endogeneity, Financial Innovation, Monetary Policy Stance, inflation, monetary economics
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