Keywords: Money, stock prices
Abstract: During the 1990s, households have sharply increased the share of
their portfolios held in equities and mutual funds and sharply
reduced the share held in bank accounts. We show that this
reallocation has substantially increased the impact of
financial-market developments on the demand for money.
Specifically, both increases and decreases in the Wilshire 5000
have boosted the demand for money funds during the 1990s,
although they had little effect on money funds during the 1980s.
The estimated effects in the 1990s are generally statistically
significant and economically important.
Full paper (149 KB PDF)
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