IDEAS home Printed from https://ideas.repec.org/p/boe/boeewp/21.html
   My bibliography  Save this paper

An Empirical Analysis of M4 in the United Kingdom

Author

Listed:
  • Paul Fisher
  • Juna Vega

Abstract

This paper presents some econometric modelling of M4 balances. It extends earlier Bank research on M4 by looking separately at personal and corporate holdings of money, and applies some recent advances in econometric methodology. The results confirm the importance of sectoral analysis. The results are especially encouraging for the personal sector where a significant role is found for wealth, interest rates and inflation. More surprising is the finding that simultaneous estimation of money demand and a consumption function improves both specification - the dynamic interaction of money and consumption may have an important role to play in explaining the recent behaviour of both variables. Corporate sector analysis is more problematic. The analysis and empirical results both suggest that interest rates must be explained simultaneously with corporate sector M4 balances. But no stable model of interest rates is found. Nevertheless a relatively simple model can be estimated for corporate sector M4. The results suggest that the effects of financial liberalisation can be captured by a combination of wealth and interest rate differentials. To the extent that wealth/income ratios become more stable, M4 velocity may also stabilise in the future.

Suggested Citation

  • Paul Fisher & Juna Vega, 1993. "An Empirical Analysis of M4 in the United Kingdom," Bank of England working papers 21, Bank of England.
    • Handle: RePEc:boe:boeewp:21
    as

    Download full text from publisher

    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1993/wp21.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Breedon, F J & Fisher, P G, 1996. "M0: Causes and Consequences," The Manchester School of Economic & Social Studies, University of Manchester, vol. 64(4), pages 371-387, December.
    2. Bardsen, G. & Fisher, P.G., 1993. "The Importance of Being Structured," Papers 02-93, Norwegian School of Economics and Business Administration-.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giuseppe Ferrero & Andrea Nobili & Patrizia Passiglia, 2007. "The sectoral distribution of money supply in the Euro area," Temi di discussione (Economic working papers) 627, Bank of Italy, Economic Research and International Relations Area.
    2. K Alec Chrystal & Paul Mizen, 2001. "Consumption, money and lending: a joint model for the UK household sector," Bank of England working papers 134, Bank of England.
    3. Browne, F.X. & Fagan, G. & Henry, J., 1997. "Money Demand in EU Countries : A Survey," Papers 7, European Monetary Institute.
    4. Elmer Sterken, 2004. "Demand for money and shortages in Ethiopia," Applied Economics Letters, Taylor & Francis Journals, vol. 11(12), pages 759-769.
    5. Giuseppe Ferrero & Andrea Nobili & Patrizia Passiglia, 2011. "Assessing excess liquidity in the euro area: the role of sectoral distribution of money," Applied Economics, Taylor & Francis Journals, vol. 43(23), pages 3213-3230.
    6. Bridges, Jonathan & Thomas, Ryland, 2012. "The impact of QE on the UK economy – some supportive monetarist arithmetic," Bank of England working papers 442, Bank of England.
    7. Mark S Astley & Andrew G Haldane, 1995. "Money as an Indicator," Bank of England working papers 35, Bank of England.
    8. Anthony Yates & Bryan Chapple, 1996. "What Determines the Short-run Output-Inflation Trade-off?," Bank of England working papers 53, Bank of England.
    9. repec:dgr:rugcds:199909 is not listed on IDEAS
    10. Prasanna Gai, 1996. "International Bank Lending to LDCs - an Information-Based Approach," Bank of England working papers 43, Bank of England.
    11. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis. Part 1 - The Personal Sector," Bank of England working papers 61, Bank of England.
    12. Gerdesmeier, Dieter, 1996. "Die Rolle des Vermögens in der Geldnachfrage," Discussion Paper Series 1: Economic Studies 1996,05, Deutsche Bundesbank.
    13. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis Part 2 The Corporate Sector," Bank of England working papers 62, Bank of England.
    14. Scott Hendry, 1995. "Long-Run Demand for M1," Macroeconomics 9511001, University Library of Munich, Germany.
    15. Mark Deacon & Andrew Derry, 1994. "Estimating the Term Structure of Interest Rates," Bank of England working papers 24, Bank of England.
    16. Gerdesmeier, Dieter, 1996. "The role of wealth in money demand," Discussion Paper Series 1: Economic Studies 1996,05e, Deutsche Bundesbank.
    17. Calza, Alessandro & Sousa, João, 2003. "Why has broad money demand been more stable in the euro area than in other economies? A literature review," Working Paper Series 261, European Central Bank.
    18. David Barr & Bahram Pesaran, 1995. "An assessment of the relative importance of real interest rates, inflation and term premia in determining the prices of real and nominal UK bonds," Bank of England working papers 32, Bank of England.
    19. Barlow, David, 2023. "The stability of UK households Divisia money balances," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 451-459.
    20. Ian Bond & Gareth Murphy & Gary Robinson, 1994. "Potential credit exposure on interest rate swaps," Bank of England working papers 25, Bank of England.
    21. Mohammad Hasan, 1998. "The choice of appropriate monetary aggregates in the United Kingdom," Applied Economics Letters, Taylor & Francis Journals, vol. 5(9), pages 563-568.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marco Bianchi, 1995. "Testing for convergence: evidence from non-parametric multimodality tests," Bank of England working papers 36, Bank of England.
    2. Scott Hendry, 1995. "Long-Run Demand for M1," Macroeconomics 9511001, University Library of Munich, Germany.
    3. Quah, Danny & Vahey, Shaun P, 1995. "Measuring Core Inflation?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1130-1144, September.
    4. G. Coenen & J.-L. Vega, 2001. "The demand for M3 in the euro area," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(6), pages 727-748.
    5. Ante Babić, 2000. "The Monthly Transaction Money Demand in Croatia," Working Papers 5, The Croatian National Bank, Croatia.
    6. Bonin, Holger & Zimmermann, Klaus F., 2000. "The Post-Unification German Labor Market," IZA Discussion Papers 185, Institute of Labor Economics (IZA).
    7. K Alec Chrystal & Paul Mizen, 2001. "Consumption, money and lending: a joint model for the UK household sector," Bank of England working papers 134, Bank of England.
    8. Browne, F.X. & Fagan, G. & Henry, J., 1997. "Money Demand in EU Countries : A Survey," Papers 7, European Monetary Institute.
    9. Hasan Bakhshi & Andrew Haldane & Neal Hatch, 1999. "Some Costs and Benefits of Price Stability in the United Kingdom," NBER Chapters, in: The Costs and Benefits of Price Stability, pages 133-198, National Bureau of Economic Research, Inc.
    10. Anthony Garratt & Kevin Lee & M. Hashem Pesaran & Yongcheol Shin, 2003. "A Long run structural macroeconometric model of the UK," Economic Journal, Royal Economic Society, vol. 113(487), pages 412-455, April.
    11. Reuven Glick & Ramon Moreno, 2001. "Is money still useful for policy in East Asia?," Pacific Basin Working Paper Series 2001-12, Federal Reserve Bank of San Francisco.
    12. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis Part 2 The Corporate Sector," Bank of England working papers 62, Bank of England.
    13. Greenslade, Jennifer V. & Hall, Stephen G. & Henry, S. G. Brian, 2002. "On the identification of cointegrated systems in small samples: a modelling strategy with an application to UK wages and prices," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1517-1537, August.
    14. Francis Breedon & Ian Twinn, 1995. "Valuation of underwriting agreements for UK rights issues: evidence from the traded option market," Bank of England working papers 39, Bank of England.
    15. E. Stefanescu & M. Bursik & A. Patra, 2012. "Effect of digital elevation model on Mohr-Coulomb geophysical flow model output," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 62(2), pages 635-656, June.
    16. Hendry, David F., 1997. "On congruent econometric relations : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 163-190, December.
    17. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis. Part 1 - The Personal Sector," Bank of England working papers 61, Bank of England.
    18. Chadha, Jagjit S & Haldane, Andrew G & Janssen, Norbert G J, 1998. "Shoe-Leather Costs Reconsidered," Economic Journal, Royal Economic Society, vol. 108(447), pages 363-382, March.
    19. G. Coenen & J.-L. Vega, 2001. "The demand for M3 in the euro area," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(6), pages 727-748.
    20. K. Alec Chrystal & Paul Mizen, 2005. "Other financial corporations: Cinderella or ugly sister of empirical monetary economics?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(1), pages 63-80.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Digital Media Team (email available below). General contact details of provider: https://edirc.repec.org/data/boegvuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.