The public's preference for cash
DOI:
https://doi.org/10.13133/2037-3643/11967Keywords:
Supply of money, public preference for cash, cash preference ratio, quantity of money, commercial banks, deposits, monetary policyAbstract
The article examines the validity of Professor Gambino’s thesis that the supply of money in an economy with a commercial banking system is likely to vary owing to changes in the public’s preference for cash. The author first attempts to show that the public’s cash preference ratio does not remain constant in the short run and to adduce reasons for its variability. The effects of variations in the cash preference ratio upon the quantity of money are then discussed, assuming, in turn, that the commercial banks regard either their cash or their liquid assets as the main determinant of the level of deposits. Finally, some plausible arguments are presented in favour of a recognition of a variable cash preference for an effective monetary policy.
JEL: E41, E51
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