Baumol–Tobin model

Baumol–Tobin model is a model of money demand positing that people choose optimal money holdings by comparing the opportunity cost of the forgone interest from holding money and the benefit of making less frequent trips to the bank.

Definition

According to Macroeconomics by Mankiw (7th edition),

Baumol–Tobin model. A model of money demand positing that people choose optimal money holdings by comparing the opportunity cost of the forgone interest from holding money and the benefit of making less frequent trips to the bank.