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MONETARY ANTICIPATONS AND THE DEMAND FOR MONEY SOME UK EVIDENCE *
Author(s) -
Cuthbertson K.
Publication year - 1986
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.1467-8586.1986.tb00220.x
Subject(s) - economics , demand shock , shock (circulatory) , demand for money , demand curve , autoregressive model , monetary economics , distributed lag , speculative demand , order (exchange) , econometrics , function (biology) , carr , aggregate demand , microeconomics , monetary policy , finance , medicine , ecology , evolutionary biology , biology
The Carr‐Darby ‘shock‐absorber’ hypothesis, that unanticipated changes in the money supply influence the demand for real money balances but anticipated changes do not, is tested on UK data for narrow money, M1. For comparison with earlier studies on US data we take the (real first order) partial adjustment model as one example of a ‘conventional’ demand for money function. However the Carr‐Darby hypothesis is also tested taking a more general autoregressive distributed lag model as the ‘conventional’ demand function. For both ‘conventional’ demand for money functions we find that the shock‐absorber hypothesis is not supported for M1 using UK data.