Demand for cash with intra-period endogenous consumption

Avner Bar-Ilan, Nancy Marion

Research output: Contribution to journalArticlepeer-review


We extend the literature on the demand for money by relaxing the assumption of a constant rate of consumption. Although total consumption is still fixed over the period, agents can choose more than one rate of consumption and cash depletion in the period to minimize the cost of money management. Consistent with empirical evidence, we find that agents do not smooth intra-period consumption. Instead, their rate of consumption will be positively related to their cash position. This positive correlation depends on the volatility of the consumption process.

Original languageEnglish
Pages (from-to)2668-2678
Number of pages11
JournalJournal of Economic Dynamics and Control
Issue number12
StatePublished - Dec 2013


  • Consumption smoothing
  • Drift control
  • Money demand

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics


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