Sixty Years Since Baumol-Tobin: A Celebration

Sixty Years Since Baumol-Tobin: A Celebration – September 28-29, 2012

On September 28th-29th 2012, NYU hosted the conference “Sixty Years Since Baumol-Tobin: A Celebration.” The conference was funded by the CV Starr Center with additional support from NYU’s Stern Center for Global Economy and Business. The program committee was composed by Fernando Alvarez (Chicago), Francesco Lippi (EIEF-Rome), and Gianluca Violante (NYU).

The aim of the conference was to celebrate the 60th anniversary of the publication of  William Baumol’s seminal paper The transactions demand for cash: an inventory theoretic approach.”

The conference brought together top researchers  working in macroeconomics and financial economics to demonstrate how central the Baumol-Tobin (Baumol, 1952; Tobin, 1956) insight has become in these fields. The Baumol-Tobin model illustrates costs and benefits from holding money: the liquidity benefits must be traded off against the costs deriving from (i) foregoing the return on an alternative interest-bearing alternative asset and (ii) transferring balances across the two assets.

The conference was kicked off by introductory remarks from William Baumol, a Professor at the Stern School of Business. Will could not be present at the conference, but kindly enough phoned in to welcome all participants.

The first day of the conference included three presentations. The Nobel Prize in Economics Bob Lucas (Chicago) and Juan-Pablo Nicolini (Minneapolis Fed) discussed the long-run stability of money demand in the US.  Mike Dotsey (Philly Fed) presented a model where the Baumol-Tobin insight was developed within an equilibrium model with segmented asset markets. Dean Corbae (Wisconsin) studied the role of reserve requirements in a model of banking industry dynamics.

The conference dinner closed the first day.

The second day included five talks. Simona Cociuba (Western Ontario) analyzed international risk sharing in a model of segmented markets. Nikolai Russanov (Wharton) developed a model where houses, thanks to mortgage refinancing, can become a liquid asset and studied how this menchanism can help households smooth consumption. Shouyong Shi (Toronto) developed  a theoretical monetary model featuring non-degenerate distributions of money holdings. Randy Wright (Wisconsin) and Victor Rios-Rull (Minnesota) presented models where money demand is driven by household composition and life-cycle considerations.

The full program of the conference, with links to all papers, is available here :

Discussion surrounding each presentation was always lively.

The conference was well attended by NYU faculty and students, as well as by over 20 outside participants.