TY  - BOOK
AU  - Alvarez,Fernando E.
AU  - Lippi,Francesco
ED  - National Bureau of Economic Research.
TI  - Financial Innovation and the Transactions Demand for Cash
T2  - NBER working paper series
PY  - 2007///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - September 2007; Hardcopy version available to institutional subscribers
N2  - We document cash management patterns for households that   are at odds with the predictions of deterministic inventory  models that abstract from precautionary motives. We extend  the Baumol-Tobin cash inventory model to a dynamic  environment that allows for the possibility of withdrawing  cash at random times at a low cost. This modification   introduces a precautionary motive for holding cash and   naturally captures developments in withdrawal technology,  such as the increasing diffusion of bank branches and ATM  terminals. We characterize the solution of the model and  show that qualitatively it is able to reproduce the  empirical patterns. Estimating the  structural parameters we  show that the model quantitatively accounts for key features  of the data. The estimates are used to quantify the  expenditure and interest rate elasticity of money demand,  the impact of financial innovation on money demand, the  welfare cost of inflation, the gains of disinflation and the  benefit of ATM ownership
UR  - https://www.nber.org/papers/w13416
UR  - http://dx.doi.org/10.3386/w13416
ER  -