Post-Keynesian Modifications To The Demand For Money Essay, Research Paper

In many respects, question usefulness of

distinguishing Transactions demand from Asset demand for cash as separate

components in total MD.?? 1.

Baumol &

the Interest Rate Sensitivity of Transactions Demands: Baumol (1952) implies that transactions

demand for cash will respond inversely to interest rate changes (ceteris

paribus: reinforces i. rate sensitivity of total MD).? (Opportunity cost in i. foregone of cash balance but balanced vs

costs of i. yielding assets ? liquidation costs/inconvenience ? indiv will seek

to minimise these total costs.)? So

higher i. rate ? decrease transactions demand for cash & vice-versa.? + Note: If the act of liquidation costless,

there would be no demand for transactions balances (intuitively appealing) 2.

Tobin (1958)

& the Keynesian Asset Demand for Cash: reformulation of Keynesian demand for money to meet obj. that indivs?ll

often hold speculative balances & financial assets. Allows it.