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- Title
Market intelligence gathering, asymmetric information, and the instability of money demand.
- Authors
Kim, Seon Tae; Marchesiani, Alessandro
- Abstract
The observed money demand in the U.S. had a stable negative relation with the interest rate up until the 1990s. After this period, this relation fell apart and has never been restored. We show that the central bank's ability to gather information, referred to as market intelligence (MI), matters to generate an upward‐sloping money demand curve. We calibrate the model to the U.S. data for the period from 1990 to 2019 and show that MI helps to match the money demand. We also show that it is beneficial for the society, since it mitigates the inefficiency associated with asymmetric information.
- Subjects
DEMAND for money; RECONNAISSANCE operations; INFORMATION asymmetry; MARKETING strategy
- Publication
Economic Inquiry, 2024, Vol 62, Issue 3, p1216
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/ecin.13211