REPRESENTATIVE ECONOMIC AGENT, PROPENSITIES TO SAVE, AND MONEY DEMAND STABILITY
Article first published online: 28 SEP 2010
© 2010 The Author. Bulletin of Economic Research © 2010 Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research.
Bulletin of Economic Research
Volume 63, Issue 2, pages 200–212, April 2011
How to Cite
Tin, J. (2011), REPRESENTATIVE ECONOMIC AGENT, PROPENSITIES TO SAVE, AND MONEY DEMAND STABILITY. Bulletin of Economic Research, 63: 200–212. doi: 10.1111/j.1467-8586.2009.00344.x
- Issue published online: 15 MAR 2011
- Article first published online: 28 SEP 2010
- money demand stability;
- representative agent;
In simple-sum aggregate money demand studies, long-run elasticities and the propensities of individuals to save are presumed to be equal and can be depicted by those of the representative economic agent. This study uses panel data to test this hypothesis within the theoretical framework of the inventory-theoretic transactions approach and finds it fails to hold. At the microeconomic level, money demand functions are not homogeneous, and the impacts of monetary policies on economic activities of households are not as stable as those suggested in aggregate money demand studies.