Pii: S1059-0560(99)00037-4

One of the major issues associated with the short-run aggregate money demand is that the speed of adjustment has become very slow or even negative when the post-1973 periods are included in regressions. This implies that the long-run effects of income, wealth, or the opportunity costs on money demand may be so large that a small change in any of these variables would lead to unreasonably large fluctuations in asset demand. Using microeconomic data from the Survey of Income and Program Participation conducted by the U.S. Bureau of the Census, this study finds that the speeds at which individuals adjust their actual quantities of financial assets toward the desired levels are actually quite fast. In the long run, there is no indication that the desired quantities of monetary assets fluctuate widely whenever an explanatory variable is disturbed.  1999 Elsevier Science Inc. All rights reserved. JEL classification: E41