The demand of liquid assets with uncertain lumpy expenditures

TitleThe demand of liquid assets with uncertain lumpy expenditures
Publication TypeJournal Article
Year of Publication2013
AuthorsAlvarez, FE, Lippi, F
JournalJournal of Monetary Economics
Volume60
Issue7
Pagination753–770
Abstract

We consider an inventory model for a liquid asset where the per-period net expenditures have two components: one that is frequent and small and another that is infrequent and large. We give a theoretical characterization of the optimal management of liquid asset as well as of the implied observable statistics. We use our characterization to interpret some aspects of households' currency management in Austria, as well as the management of demand deposits by a large sample of Italian investors.

URLhttp://www.sciencedirect.com/science/article/pii/S0304393213000846
DOI10.1016/j.jmoneco.2013.05.008
Keywordsinventory theory, liquid assets, lumpy purchases, money demand