For their useful comments, we would like to thank the editor Paul Evans, two anonymous referees, Anton Braun, Chris Edmond, Rasmus Fatum, Simon Gilchrist, François Gourio, Naohisa Hirakata, Takashi Kano, Bob King, Pete Klenow, Yoichi Matsubayashi, Masao Ogaki, Tsunao Okumura, Marc Rysman, Adrian Verdelhan, Vlado Yankov, seminar participants at the Green Line Macro Meeting, the Winter Institute of Macroeconomics 2009, the 5th Workshop on Macroeconomic Dynamics, the Search Theory Workshop, and the staff of the Institute for Monetary and Economic Studies (IMES), the Bank of Japan (BOJ). All errors are our own. A separate appendix, data set, and programs are available upon request. Views expressed in this paper are those of the authors and do not necessarily reflect the official views of the BOJ.
Inventory-Theoretic Money Demand and Relative Price Dynamics
Article first published online: 17 MAR 2013
© 2013 The Ohio State University
Journal of Money, Credit and Banking
Volume 45, Issue 2-3, pages 299–326, March-April 2013
How to Cite
SUDO, H. I. N. (2013), Inventory-Theoretic Money Demand and Relative Price Dynamics. Journal of Money, Credit and Banking, 45: 299–326. doi: 10.1111/jmcb.12003
- Issue published online: 17 MAR 2013
- Article first published online: 17 MAR 2013
- Received January 4, 2011; and accepted in revised form May 9, 2012.
- inventory-theoretic money demand;
- credit goods;
We construct a two-goods inventory-theoretic money demand model and find that the model implies, in a monetary contraction, the decline in the prices of low cash-intensity goods, durables, or luxuries outpaces that of high cash-intensity goods, nondurables, or necessities. Using U.S. data, we show that our model’s predictions are consistent with the data.