This paper extends a New Keynesian model to include roles for currency and depositsas competing sources of liquidity services demanded by households. It showsthat, both qualitatively and quantitatively, the Barnett critique applies: While a Divisiaaggregate of monetary services tracks the true...

We find that U.S. corporations' demand for liquidity is sensitive to two importantfactors: uncertainty facing the rm and the quality of corporate governance. Fol-lowing prior research, we find that both factors have important influences on firms'cash holdings. Our results also indicate that the...