The Baumol-Tobin Cash Management Model

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The Baumol-Tobin Cash Management Model of money demand serves as a vehicle with which to demonstrate how to use Microsoft Excel to solve optimization problems and do comparative statics analysis.

The Comparative Statics Wizard is an Excel add-in that walks the user through a series of steps in order to conduct comparative statics analysis. The files below use the Comparative Statics Wizard. The Baumol-Tobin Model is used as an example. The Comparative Statics Wizard is extremely flexible -- any problem solved by Excel's Solver can be run through the Wizard to get comparative statics analyses.

 

Downloading

Click on the links below to download the Excel and Word files. The file should automatically launch Excel or Word which then opens the file, but you may have to open the file manually. If your browser opens the file WITHIN the browser (as a plug-in), go back and right-click to download the file to your hard drive.

The Excel file contains macros and you should click Enable Macros when prompted in order to properly work with the file.

You will need Word97 and Excel97 or greater in order to use these materials. Windows or MacOS can be used.

The Comparative Statics Wizard add-in must be properly installed. For complete instructions on downloading and installing the Comparative Statics Wizard add-in, please go to www.wabash.edu/econexcel/compstatics/download.

 

Available Files

BaumolTobin.doc -- a Word file that explains the model.

BaumolTobin.xls -- an Excel workbook that describes the problem and solves it via traditional methods.

 

Contact the Author

Humberto Barreto

Department of Economics

Wabash College

Crawfordsville, IN 47933

 

Email: barretoh@wabash.edu

Phone: 765.361.6315

FAX: 765.361.6277

 

[Description and Rationale] [Download and Installation] [Examples]