The impacts of racial differences on demand for financial assets

Abstract

The purpose of this study is to examine the impacts of racial differences on the demand for financial assets by individuals. Differences in the demand for financial assets by various racial groups would have important implications not only for monetary policies but also for aggregate studies based on the representative agent model. According to the Gorman form of commodity demand, the validity of the representative model is critically dependent on the assumption that marginal propensities to hold financial assets are constant across individuals regardless of their socio-economic characteristics. Findings in this study indicate that the elasticity of wealth, marginal propensities, and the elasticity of user cost vary substantially among Whites and African Americans.