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What is buffer stock money? Does it give a satisfactory basis from which to model the demand for mon
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What is buffer stock money? Does it give a satisfactory basis from which to model the demand for mon When trying to establish a Demand for Money (Md) function, there are two main -clearly interrelated- stages: first specifying its long-run specification and then its short-run form, behaviour and adjustment. The Buffer Stock Money (BSM) theory refers to the second stage of short run adjustment and was developed partly as a reaction to the disappointing performance of "conventional" Md functions from the 70's onwards and as an attempt to explain the "long and variable lags" identified. As we will see BSM theory(ies) are generally compatible with almost all "long-run" theories of Md (Keynesian and Monetarist) and can be thought as an amalgam of many different approaches. The BSM approach has also been referred to as shock absorber money and disequilibrium money, though as we will see the latter term is rather unfortunate and...
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