Estimation of Precautionary Demand Function

抄録

When negative financial shocks attack the economy, firms and household feel financial anxieties and they prefer high liquidity asset, cash and deposit, that is, precautionary demand increases. Financial anxieties were formulated by Kimura et al as an asymmetric variance of financial shocks. We improved their result by using the growth rate model of EGARCH type. In both researches, negative financial shocks are related to precautionary demand, because positive financial shock does not cause financial anxieties. However, positive financial shocks in a typical case of bubble economy may decrease precautionary demand. In this paper, we consider two types of EGARCH models; the first one is with asymmetric variance and the other with symmetric one. Discriminating effects between negative and positive financial shocks, we propose a precautionary demand function that increases (decreases) in deflationary (inflationary) economy.