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The impact of foreign variables on domestic money demand: Evidence from the United Kingdom

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  • C. Hueng

Abstract

This paper contributes to the existing money demand literature by developing and estimating a shopping-time model in an open economy framework. Based on this microfoundations-of-money model, United Kingdom quarterly data for the period 1973:2–1997:2 are analyzed in the empirical study. After accounting for nonstationarity in the time series processes, I find three long-run relationships among the relevant variables. Estimation of the error-correction representation implied by the model shows that the foreign exchange rates and the imports consumption, in addition to the domestic variables, have significant effects on British demand for real money. Copyright Springer 2000

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  • C. Hueng, 2000. "The impact of foreign variables on domestic money demand: Evidence from the United Kingdom," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 24(2), pages 97-109, June.
    • Handle: RePEc:spr:jecfin:v:24:y:2000:i:2:p:97-109
    DOI: 10.1007/BF02752706
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    Cited by:

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    2. ALBULESCU, Claudiu Tiberiu & PÉPIN, Dominique & MILLER, Stephen M., 2019. "The micro-foundations of an open economy money demand: An application to central and eastern European countries," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 33-45.
    3. C. P. Barros & João Ricardo Faria & Luis A. Gil-Alana, 2017. "The demand for money in Angola," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(2), pages 408-420, April.

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