Adoption of financial technologies : implications for money demand and monetary policy

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• dc.contributor.author Mulligan, Casey B.ca
• dc.contributor.author Sala-i-Martin, Xavier, 1963-ca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2017-07-26T10:50:05Z
• dc.date.available 2017-07-26T10:50:05Z
• dc.date.issued 1995-08-01
• dc.date.modified 2017-07-23T02:02:05Z
• dc.description.abstract In this paper we argue that inventory models are probably not useful models of household money demand because the majority of households does not hold any interest bearing assets. The relevant decision for most people is not the fraction of assets to be held in interest bearing form, but whether to hold any of such assets at all. The implications of this realization are interesting and important. We find that (a) the elasticity of money demand is very small when the interest rate is small, (b) the probability that a household holds any amount of interest bearing assets is positively related to the level of financial assets, and (c) the cost of adopting financial technologies is positively related to age and negatively related to the level of education. Unlike the traditional methods of money demand estimation, our methodology allows for the estimation of the interest--elasticity at low values of the nominal interest rate. The finding that the elasticity is very small for interest rates below 5 percent suggests that the welfare costs of inflation are small. At interest rates of 6 percent, the elasticity is close to 0.5. We find that roughly one half of this elasticity can be attributed to the Baumol--Tobin or intensive margin and half of it can be attributed to the new adopters or extensive margin. The intensive margin is less important at lower interest rates and more important at higher interest rates.
• dc.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=134
• dc.identifier.citation Journal of Political Economy, 2000
• dc.identifier.uri http://hdl.handle.net/10230/20891
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 134
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword Macroeconomics and International Economics
• dc.title Adoption of financial technologies : implications for money demand and monetary policyen
• dc.title.alternative The adoption costs of financial technologies : implications for monetary policyen
• dc.type info:eu-repo/semantics/workingPaper