Proceedings of the ISCIE International Symposium on Stochastic Systems Theory and its Applications
Online ISSN : 2188-4749
Print ISSN : 2188-4730
第38回ISCIE「確率システム理論と応用」国際シンポジウム(2006年11月, 長野諏訪)
Estimation of Precautionary Demand Function
Yoji MoritaMd. Jahanur RahmanShigeyoshi Miyagawa
ジャーナル フリー

2007 年 2007 巻 p. 19-22


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.

© 2007 ISCIE Symposium on Stochastic Systems Theory and Its Applications
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