Comments on Chitre and Gramlich

Analyses of the reasons for holding money and of the determinants of the quantity of money held have a long history* The problem that Chitre solved is related to that literature, but the relation is not a close one* "Speculative balances" are separated from cash balances at the start of his paper and are, neglected thereafter, so that the solution that Chitre obtains cannot be regarded as operational until he derives the total demand for money or tells us how to separate money into "motivational" components. His paper can best be described as an attempt to reopen the problem discussed in Baumol's earlier study of the transactions demand for cash* But I hesitate to call this paper an extension of Baumol's work for reasons that will become apparent in a moment* Before comparing the Baumol and Chitre solutions, let me describe the problem that Chitre analyzed.