Theory and Empirical Evidence

Abstract

We focus on the money demand theories which are of particular relevance to the analysis of the demand and use of currency. Most of these theories relate to M1 (sometimes referred to as cash in this chapter), including currency and demand deposits, or even broader money concepts. At least part of their findings, however, equally hold for the demand for currency as such. A few studies deal explicitly with the demand for currency, in a spectrum of other financial assets and payments media. Besides, a number of studies on currency in relation to demand deposits are of relevance, though they focus primarily on the ratio of both money components, as an element of the money multiplier 1).