Abstract
In a recent article in this Journal, Alan Hess [8] attempts to explain short-run fluctuations in the public's desired currency-demand deposit ratio, hereafter denoted by C/D. Since statistical analyses of the C/D are few, this research by Hess is a welcome contribution. His analysis, however, is predicated upon an unproductive assumption which leads him to ignore an important determinant of the C/ D the storage costs of demand deposits . It is my purpose in this note to omit the assumption and to thereby supplement his analysis. This will be accomplished by introducing into Hess's theoretical model the out-of-pocket costs incurred in holding demand deposits which are not also incurred in the holding of currency, and by modifying his empirical analysis to include consideration of this variable.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.