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The Demand for Broad Money in the United Kingdom, 1878–1993[Note 1. The views expressed here are solely the responsibility of ...]
Author(s) -
Ericsson Neil R.,
Hendry David F.,
Prestwich Kevin M.
Publication year - 1998
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00103
Subject(s) - economics , broad money , deregulation , sample (material) , monetary policy , monetary economics , causation , demand deposit , empirical evidence , macroeconomics , philosophy , chemistry , epistemology , chromatography , political science , law
Using annual data from Friedman and Schwartz (1982), Hendry and Ericsson (1991a) developed an empirical model of the demand for broad money in the United Kingdom over 1878–1975. We update that model over 1976–1993, accounting for changed data definitions and clarifying the concept of constancy. With appropriate measures of opportunity cost and credit deregulation, the model's parameters are empirically constant over the extended sample, which was economically turbulent. Policy implications follow for parameter nonconstancy and predictive failure, causation between money and prices, monetary targeting, deregulation and financial innovation, and the effect of policy on economic agents' behavior.