Although there is general consensus on the determinants of the demand for money, the empirical performance of such money-demand equations has been unstable and poor in forecasting. In this study, the demand for money is empirically investigated on a disaggregated basis, by major sector, using Flow of Funds data, 1955i-1976iv. The results indicate that the empirical difficulties are specific to the corporate sector, that the problems in the corporate sector emerged during the later 1960s, and that foreign economic activity has become an important component in explaining holdings of cash by the corporate sector.
ASJC Scopus subject areas
- Economics and Econometrics