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Buffer Stock Models of the Monetary Sector

Published online by Cambridge University Press:  26 March 2020

James Davidson  and
Jonathan Ireland
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Extract

Modelling the monetary sector has long been seen as problematic. Conventional demand for money functions have typically failed to cope with the experience of the past 15 years (Judd and Scadding, 1982) and models based upon the counterparts to monetary growth have fared little better. The current interest in buffer stock money (see Cuthbertson and Taylor, 1987, for a recent survey) can be seen as a response to the failure of the more traditional approaches. We believe that the issues involved in the empirical implementation of the buffer stock hypothesis are subtle and that the literature to date has not dealt with them satisfactorily. In spite of the substantial difficulties involved, we think that a system approach to buffer stock modelling (for example, Davidson, 1987a) may be unavoidable to ensure theoretical consistency.

Type
Articles
Information
National Institute Economic Review , Volume 121 , August 1987 , pp. 67 - 71
Copyright
Copyright © 1987 National Institute of Economic and Social Research

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Footnotes

(1)

We acknowledge the financial support of the ESRC Macro Economic Modeling and Forecasting Consortium.

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