The influence of payment cards on currency demand in United Kingdom (2001-2010) - Essay Example

There are many things that can be seen when the major effects of money demands are debated with the use of empirical analysis. These factors have a clear impact over how things work in the economic terms around the globe. The modern world is the new place for investing money in new things, and when money is to be invested, a lot of research and analysis is required to base the decision upon. There are many factors at play, with a great many implications that need to be considered. For this reason, factors like increasing globalization, along with other things like growth in capital markets, as well as the ever changing (yet flexible) forex exchange rates, are playing a very important role for the many people who are making new discoveries in the already present literature.

Most of the time, money bankers and other analysts are not focusing their attention on the major factors that drive business on an international basis; however, with the presence of these factors, these researchers and analysts are paying all due attention towards central banks, their powers, and the factors which have an impact on them to understand money demand analysis.. Making a demand for money is not the only thing that is being put into account; however, these analyses and estimations about money demands can also be problematic.

Studying such analysis is not always an easy job. Investment of money cannot always provide anyone with good returns. Demand and supply rules are the basics of any economic system and of trading. Same goes for money as well. For this reason, you are taking money into account when you consider the different routes for money to change hands. Hence, you can take cash or bank deposits into the equation. In short, money could be M1, M2 or M3, depending on the situation. There are other terms which are regularly given to accommodate the flow of money into an economy.

When you consider interest-bearing assets, then the M1 can be given the definition of store of value, and when transactions are done, then the M1 will be denoted as the liquidity. Hence, the fine line between transactions and interest-bearing assets can be taken into account. Thus liquidity can help money rotation while interest amount can take care of the other factors. There is a great deal of demand when the other major things are considered, and for this reason, the capitalist society [believes that the formation of a person’s wealth should be given utmost importance.

Hence, in the bigger economies or the macro-economies, holding of wealth is usually not equal. This creates transaction motives and asset motives. Further classifications can also show the micro-economic