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PostKeynesian Modifications To The Demand For Money

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In many respects, question usefulness of

distinguishing Transactions demand from Asset demand for cash as separate

components in total MD.?? 1.

Baumol &

the Interest Rate Sensitivity of Transactions Demands: Baumol (1952) implies that transactions

demand for cash will respond inversely to interest rate changes (ceteris

paribus: reinforces i. rate sensitivity of total MD).? (Opportunity cost in i. foregone of cash balance but balanced vs

costs of i. yielding assets ? liquidation costs/inconvenience ? indiv will seek

to minimise these total costs.)? So

higher i. rate ? decrease transactions demand for cash & vice-versa.? + Note: If the act of liquidation costless,

there would be no demand for transactions balances (intuitively appealing) 2.

Tobin (1958)

& the Keynesian Asset Demand for Cash: reformulation of Keynesian demand for money to meet obj. that indivs?ll

often hold speculative balances & financial assets. Allows it.