Financial Market Risk and U.S. Money Demand / David Cook, Woon Choi.

Format:

Book

Government document

Author/Creator:

Cook, David.

Contributor:

Choi, Woon.

IMF Institute.

Series:

IMF Working Papers; Working Paper ; No. 2007/089

IMF Working Papers

Language:

English

Subjects (All):

Demand for money--United States--Econometric models.

Demand for money.

Stock exchanges--United States--Econometric models.

Stock exchanges.

Risk management--United States--Econometric models.

Risk management.

Hedging (Finance).

Liquidity (Economics).

Physical Description:

1 online resource (35 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2007.

Language Note:

English

Summary:

This paper examines empirically U.S. broad money demand emphasizing the role of financial market risk. We find that money demand rises with the liquidity risk of stock markets or the credit risk of corporate bond markets. After controlling for the effect of financial market risk, money demand becomes relatively stable over the last 35 years. At the sectoral level, household money holdings continue to be stable in a traditional model controlling for a decline in transactions costs for investing in mutual funds in the early 1990s. In contrast, business money holdings have been consistently (positively) associated with credit risk.

Contents:

Contents; I. Introduction; II. Data; A. Measuring Financial Market Risk; Figures; 1. Measures of Illiquidity, Liquidity Risk, and Default Risk; B. Measuring Money Balances, Opportunity Cost, and Income; 2. Movements in the Velocity of Money; Tables; 1. Augmented Dickey-Fuller Tests; III. Financial Market Risk and Broad Money Demand; A. Traditional Model and Financial Market Risk Model; 2. Cointegrating Vectors: Traditional Money Demand Model; 3. Cointegrating Vectors: Financial Risk Models of Money Demand; 3. Deviations from the Whole-Period Contegrating Vectors

B. Alternative Model Specifications with Different Sets of Risk Measures4. Cointegrating Vectors: Variations of Financial Risk Models of Money Demand; C. Out-of-Sample Forecast Using the Long-run Relationship; 5. Sub-Period Cointegrating Vectors: Variations of Financial Risk Models of Money Demand; 4. Deviations from the Sub-Period Contegrating Vectors; D. Error Correction Model; 6. Error Correction Models of Money Demand with Financial Risk; 5. Dynamic Forecast of Money Demand using ECM; IV. Sectoral Money Demand; A. Household Money Demand versus Business Money Demand

6. Money and Velocity in Household and Business Sectors7. Cointegrating Vectors for Sectoral Money Holdings; B. Business Holdings of Quasi-Money; 7. Velocity of Business Quasi-Money; V. Conclusion; 8. Cointegrating Vectors for Business Quai-Money Holdings; References

Notes:

"April 2007".

Includes bibliographical references.

Description based on print version record.

ISBN:

9786613828194

9781462315475

146231547X

9781452783420

145278342X

9781283515740

1283515741

9781451911060

1451911068