Working Paper
Modeling the demand for narrow money in the United Kingdom and the United States
Abstract: Despite the importance of well-specified empirical money-demand functions for inference, forecasting, and policy, problems in modeling have arisen concerning the economic theories of money demand, the data, institutional frameworks, financial innovation, and econometric implementation. By developing constant, data-coherent M1 demand equations for the UK and the US, we investigate these issues and explain such puzzles as \"missing money\", the great velocity decline, and the recent explosion in M1. The endogeneity of money, the Lucas critique, and the non-invertibility of our M1 models are also discussed.
Keywords: Money supply; Great Britain;
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Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: International Finance Discussion Papers
Publication Date: 1990
Number: 383