Japanese Demand for M1 and Demand Deposits: Cross-Sectional and Time-Series Evidence from
Hiroshi Fujiki and Kiyoshi Watanabe We investigate the relationship between money, short-term interest rates, and scale variables. We use three monetary aggregates: M1, demand deposits, and cash currency in circulation. Regional cross-sectional data yield stable estimates of the income elasticity of demand deposits that are positive and close to unity. We impose the estimated income elasticity obtained from cross-sectional data and estimate double-log interest rate elasticities of demand for M1 velocities and demand-deposit velocities using time-series data. Key words: Zero interest rate policy; Demand for money Views expressed in Monetary and Economic Studies are those
of the authors and do not necessarily reflect those of the Bank
of Japan or Institute for Monetary and Economic Studies. |
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