清华大学货币银行学讲义（考研必备）ch3

1,Ch3. Demand of money,Understand the reasons that different sectors want to hold moneyThe different money demand theories Transaction function (quantity equation, Fishers equation)Cash balance approach （现金余额, 剑桥方程式）Kenyes money demand theory （liquidity preference theory）Inventory model, (库存模型) Baumol 1952Precautionary demand and buffer shock (谨慎需求和缓冲存量模型)Portfolio approach (资产选择方法Tobin 1958)Friedmans quantity theory of money 弗里德曼货币需求理论Cash-in-advance (现金先期模型,CIA)Over-lapping generation model 交叠世代模型中的货币需求Shopping time model Test of money demand 需求的检验问题,2,3,3.1. Fishers transaction function (approach ),model：M=quantity of money; V=velocity: the number of times that a unit money is used; P=price level; Y=volume of transaction or production,Main assumptions：the velocity is decided by a societys payment methods. The fluctuation of velocity is can be neglected in short run, and it is stable in long-run. It can be thought as a constant. (stability of velocity)Real output is determined solely by economic resources and production technical, so in short run Y is also fixed.,identities relationships vs. behavioral relationships,4,Main conclusions：Demand of money is not sensitive to interest rate. Quantity of money has stability constant relation with nominal output; Quantity of money decide the price level. Catachrestic of the model：Fishers equation research the money demand from transaction function of money, pay attention of aggregate demand; neglect the role of interest rate. V is stable in long-run.Monetary policy (货币政策)：Keep the stability supply of money, according to the real growth of economy.,5,3.2 Cash balance approach(Cambridge equation),model：M = kPY M: money demand; Y: real income or real wealth; P: price K: coefficient, the proportion of balance of cash to total of income or wealth,Main assumption：Wealth are hold by the forms of money and alternatives Household pursue the maximum of utility to decide the proportion of the money to the total of wealth. The opportunity cost for holding money is an important element for money demandThe returns & expectation return of others asset will cause the change of k.,6,Characteristic of the model (comparing with the model of Fisher):Analyses from individuals willing for hold money ；Not only consider the function of “medium of transaction”, but also consider the function of “store of value”; Consider the influences of expectation;,Relation of variables Under the situation that there is stable demand of cash balance, increasing the face-value of money or total quantity of money cause the increasing of price of commodities. Until the new equilibrium of cash balance resumed.,7,3.3 money demand of Kenyes（liquidity preference theory 流动性偏好理论）,3.3.1 framework of Kenyess money demand Kenyess money：Medium of trade, defer payment, store of value, unit account, money is a kind of compulsory contract of a society or a country. The society or government decided critical point of the contract.,The model：M /P = f(Y, i) ;Y: income，i=interest rate (bond rate).Key points: Analyses from the motives of hold money by individualsMention the speculation motive and then introduce the interest rate as opportunity cost for holding money;Introduce the uncertainty factors into the demand of moneyIntroduced expectation of the price and return of bonds ；,8,Relation of variables & conclusions,Speculative demand: From individuals to a society,9,3.3.2 Post-Kenyes model：inventory-theory approach（Baumol-Tobin 1952 ）,Baumol（1952),assumptions：Return of money is 0；other assets (deposits or bonds) have positive returnIncome Y is ascertained and it is deposited at bank initially, expenditure are uniformity in each day No saving at end of the period.Freedom convert the deposit to cash，however there is a transaction cost for each of transform. Transform times (n) can be freedom decided,10,Total cost to hold money ：,Y=income，C= the cost for hold money，k=the deposits that be converted to money each time; i=interest rate of deposits， b=transaction cost.,income elasticity and interest rate elasticity (of transaction demand) income elasticity of money (moneys “scale of economy ”)interest rate elasticity of money,first derivation of C :,11,3.3.3 Precautionary demandbuffer stock, buffer inventory 缓冲存量理论,Background：the traditional methods Vs. policies of cash management of firms & individuals About money： money is the best tool to prevent the uncertainty shock. Firms & individual are voluntary to hold a part of fluctuate amount of money to defense the uncertainty shock.Policy to hold money with uncertainty With the uncertainty about time of receive of income and time of expenditure, firms & individuals usually used a “(high & low criteria) two parameter control policy”.With the uncertainty or excess of money supply, firms & individuals usually hold money as “buffer inventory”, since adjustment cost of money usually less than that of other financial assets. Money demand is influenced by real income, expected price, interest rate, hence the expectation should be take into the determination of money demand.,12,13,Assumption:Two asset: money Rp: Return of portfolio asset, expected return, risk of portfolio Proportion of asset in a portfolio and its relation with risk.The expected return of portfolio and its relation with interest rate, risk of bonds as well as the risk of portfolio assetsInterest rate and proportion of bond in a portfolio.,Tobin firstly introduced risk of into money demand function. And provide more realistic assumption to develop the speculation motive of Kenyes theory.,3.3.4 Post-Keynes model: speculation motive & interest rate (Tobin portfolio analyses),14,15,3.4 Friedmans money demand theory,3.4.1 framework of Friedman money demandDefinition of money by Friedman：Money is a temporarily abode of purchasing power, is the temporarily substitute of financial assets, real estate as well as human capital. Determination of money demand: Permanent income,16,3.4.2 Main assumption：Market is perfect, money and other assets can be substituted easily The return of assets usually change synchronization Decision of holding money or holding other securities is depend on relative return of assets. Interest rate doesnt influence the relative rate of return thus have no effects on money demandWealth and permanence income keep relatively stabled relation. The highter permanence income the more money demanded.The higher ratio of human capital to total wealth, the more quantity money demanded.The money demand will reduced when there are higher returns of other assets as well as there is a higher inflation rate.,17,model：Y: permanent income；h: the ratio of human capital to total wealth ；rm, rb, re -the return of money, bond, and other securities respectively; are the variable of opportunity cost； the ratio of change of price； the other factor, such as technical, preference of individual,3.4.3. The Friedman model: from first function to simplified function,18,The original function: “The quantity theory of money: a restatement” （1956）,The first simplification：,Permanent income & the second simplification ： “The demand for money: some theoretical & empirical results”（1959）,Permanent income has closed relation with wealth of individual (WtV). WtV is resources of permanent income. The wealth is weighted average of present value of all future Permanent income.,Where：w= ratio of human capital to total wealth.,19,“h”的简化：“u”的简化：YP替代y：“R”的出现：,The third simplified: cancel of “R”-a key step for the theory,20,Conclusion:Interest have no effects on money demand；Permanence income (including human capital) is the key factor for determination of MDPeople concern long-term price level, since they are concerned about permanence income；MD is stableMoney velocity is an observed parameter,21,3.5 Post-Ks model: money demand in Overlapping-generation,Allais（1947), Samuelson（1958）& Diamond（1965）setup the overlapping generation model which also concern the money demand. The model is a classical model to analyses macro economy problem from the decision making of individual,assumption：Two period in a life cycle (t1 The growth of population is same, as: n，then at each period there is same social structure. (ratio of population will not change) The younger trade with the older with price: Pt，Without increase of money，at the second period, the price will be: P t1。,22,The people pursue the maximum of individuals utility at term t:,In order to have maximum of utility, there should have：,23,3.6 Post-Keynesian theory: Cash-in-advance (Clower,1967),Clower constraint:(no uncertainty),Sb to：,conclusion：,问题：货币的消费流通速度为：1,24,3.7 testing of money demand,3.7.1 test of money demand (contents of the tests) ：Whether the interest rate is an important variable for money demandHow m