The use of electronic funds transfer to capture the effects of cash management practices on the demand for demand deposits: a note

Article Abstract:

Theoretical grounds for the use of the number of electronic funds transfers to indicate increasing cash management sophistication within the environment of an inventory theoretic model of money demand is provided. The demand for demand deposits is determined by solving a simultaneous equation system that also determines the optimal level of cash management, which shows that transactions costs are influenced by the level of cash management services, in turn implying that transactions costs are endogenous. The level of cash management services is shown to be closely associated with the number of electronic funds transfers. The results of the research indicate that models of money demand that consider transactions costs to be exogenous and fixed are mis-specified and will perform poorly when transactions costs are changing. These problems are overcome by explicitly incorporating the changes in transactions costs through use of electronic funds transfers.

Banking industry, Analysis, Supply and demand, Electronic funds transfer systems, Cash management, Money supply, Bank deposits

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Autoregressive modeling of earnings-investment causality

Article Abstract:

The purpose of this paper is to empirically test the relationships between corporate earnings and investment. In particular, the study investigates whether knowledge of past investments improves the prediction of future earnings beyond predictions that are based on past earnings alone. Similarly, it investigates whether knowledge of past earnings improves the prediction of future investments beyond knowledge of past investments alone. This is the empirical definition of Granger causality. The empirical results show that the bivariate past series of earnings and investments is superior to the univariate series in predicting future investments but not in predicting future earnings. (Reprinted by permission of the publisher.)

Profit, Profits, Investments, Investment analysis, Securities analysis

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