The Demand for Liquid Asset with Uncertain Lumpy Expenditures

Fernando Alvarez
Francesco Lippi
Publication Type: 
Working Papers
Publication Article File: 
Publication Year: 
2011

We consider an inventory model for 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 the implied observable statistics. We use our characterization to understand aspects of the the management of currency of Austrian households, as well as the management of liquid asset of Italian investors.

This paper was presented at the Optimal Design of Payments Systems Workshop in May of 2011.

JEL Codes: 
E5
Region: 
Global
Country: 
Global
Topic: 
Regulation
Topic: 
Economic Modeling
Topic: 
Payments Systems