Document Type
Article
Publication Date
Summer 2000
Source Publication
Journal of Applied Business Research
Abstract
A Keynesian money demand model is used to examine the interest elasticity of financial asset holdings by income level. In this model, once an individual receives income, they first make transactions, and any leftover income goes for speculative purposes. Since only speculative balances are assumed to change with interest rates, individuals with income used mainly for transactions purposes are theorized to have asset holdings that are unresponsive to interest rates, while higher income individuals with speculative balances are expected to be more responsive to interest rates. The results support the Keynesian model, as lower income households are found to have the smallest interest elasticity, and the estimated elasticity rises with income.
Comments
Originally published in Journal of Applied Business Research, Volume 16, No. 3 (Summer 2000).
The website of Applied Business Reasearch is avaiable at: http://www.cluteinstitute-onlinejournals.com/archives/journals.cfm?Journal=Journal%20of%20Applied%20Business%20Research
This version of the article is identical to the published version.