This volume provides an account of the existing literature on the demand for money. It shows how the money demand function fits into static and dynamic macroeconomic analyses and discusses the problem of the definition (aggregation) of money. In doing so, it shows how the successful use of the simple representative consumer paradigm in monetary economics has opened the door to the succeeding introduction into monetary economics of the entire microfoundations, aggregation theory, and micro-econometrics literatures. It also compares and contrasts the theoretical and empirical aspects of the microeconomic- and aggregation-theoretic approach to the demand for money to those of other paradigms, presents empirical evidence using state-of-the-art econometric methodology, and recognizes the existence of unsolved problems and the need for further developments. Finally, it suggests answers to a number of problems raised over previous studies of the demand for money. Most important is the idea that traditional measures of money and log-linear money demand functions are inappropriate in the recent volatile financial environment.
List of Figures. List of Tables. Acknowledgments. Foreword. Introduction. Part 1: Static Monetary Macroeconomics. 1. Classical Macroeconomic Theory. 2. Keynesian Macroeconomic Theory. Part 2: Dynamic Monetary Macroeconomics. 3. Neoclassical Growth Theory. 4. Monetary Growth Theory. Part 3: Theoretical Approaches to the Demand for Money. 5. The Classics, Keynes, and Friedman. 6. Transactions Theories of Money Demand. 7. Portfolio Theories of Money Demand. Part 4: Empirical Approaches to the Demand for Money. 8. Conventional Money Demand Functions. 9. Modeling Trends. 10. Cointegration and the Demand for Money. 11. Balanced Growth and the Demand for Money. Part 5: Microfoundations and Monetary Aggregation. 12. Microeconomic Foundations. 13. The New Monetary Aggregates. 14. Nominal Stylized Facts. Part 6: Microfoundations and the Demand for Money. 15. The Nonparametric Approach to Demand Analysis. 16. The Parametric Approach to Demand Analysis. 17. Flexible Functional Forms and Demand Systems. Part 7: Microeconometrics and the Demand for Money. 18. The Econometrics of Demand Systems. 19. Applied Monetary Demand Analysis. 20. Future Research Agenda. References. Author Index. Topic Index.