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The demand for broad money in the United Kingdom, 1878-1993

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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.

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  • Neil R. Ericsson & David F. Hendry & Kevin M. Prestwich, 1997. "The demand for broad money in the United Kingdom, 1878-1993," International Finance Discussion Papers 596, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:596
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    Cited by:

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    2. Mercik, Aleksander & Słoński, Tomasz & Karaś, Marta, 2024. "Understanding crypto-asset exposure: An investigation of its impact on performance and stock sensitivity among listed companies," International Review of Financial Analysis, Elsevier, vol. 92(C).
    3. David H. Bernstein & Andrew B. Martinez, 2021. "Jointly Modeling Male and Female Labor Participation and Unemployment," Econometrics, MDPI, vol. 9(4), pages 1-14, December.
    4. Błażejowski, Marcin & Kufel, Paweł & Kufel, Tadeusz & Kwiatkowski, Jacek & Osińska, Magdalena, 2018. "Model selection for modeling the demand for narrow money in transitional economies," MPRA Paper 90458, University Library of Munich, Germany.
    5. Jennifer L. Castle & David F. Hendry & Andrew B. Martinez, 2022. "The historical role of energy in UK inflation and productivity and implications for price inflation in 2022," Economics Series Working Papers 983, University of Oxford, Department of Economics.
    6. Ericsson, Neil R., 2017. "How biased are U.S. government forecasts of the federal debt?," International Journal of Forecasting, Elsevier, vol. 33(2), pages 543-559.
    7. Magdalena Osinska & Marcin Blazejowski & Pawel Kufel & Tadeusz Kufel & Jacek Kwiatkowski, 2020. "Narrow Money Demand in Indonesia and in Other Transitional Economies – Model Selection and Forecasting," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 1291-1311.
    8. Petrevski, Goran & Jovanovski, Kiril, 2010. "Demand for money in Macedonia," SEER Journal for Labour and Social Affairs in Eastern Europe, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 13(1), pages 121-136.
    9. Strohsal, Till & Proaño, Christian R. & Wolters, Jürgen, 2019. "Characterizing the financial cycle: Evidence from a frequency domain analysis," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 568-591.
    10. Assenmacher-Wesche, Katrin & Beyer, Andreas, 2019. "A cointegration model of money and wealth," CFS Working Paper Series 619, Center for Financial Studies (CFS).
    11. Jennifer Castle & David Hendry, 2013. "Semi-automatic Non-linear Model selection," Economics Series Working Papers 654, University of Oxford, Department of Economics.
    12. Neil R. Ericsson, 2021. "Dynamic Econometrics in Action: A Biography of David F. Hendry," International Finance Discussion Papers 1311, Board of Governors of the Federal Reserve System (U.S.).
    13. Igor Pelipas, 2011. "Structural Breaks and Dynamic Characteristics of Inflation and Growth Rates of Monetary Aggregates," BEROC Working Paper Series 15, Belarusian Economic Research and Outreach Center (BEROC).
    14. Castle, Jennifer L. & Hendry, David F., 2009. "The long-run determinants of UK wages, 1860-2004," Journal of Macroeconomics, Elsevier, vol. 31(1), pages 5-28, March.
    15. Jalles, Joao Tovar, 2019. "Crises and emissions: New empirical evidence from a large sample," Energy Policy, Elsevier, vol. 129(C), pages 880-895.
    16. Eliasson Ann-Charlotte, 2001. "Detecting Equilibrium Correction with Smoothly Time-Varying Strength," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 5(2), pages 1-19, July.
    17. Hendry, David F. & Mizon, Grayham E., 2001. "Reformulating empirical macro-econometric modelling," Discussion Paper Series In Economics And Econometrics 0104, Economics Division, School of Social Sciences, University of Southampton.
    18. Barlow, David, 2023. "The stability of UK households Divisia money balances," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 451-459.
    19. Hendry, David F., 2000. "On detectable and non-detectable structural change," Structural Change and Economic Dynamics, Elsevier, vol. 11(1-2), pages 45-65, July.
    20. Timo Teräsvirta, 2017. "Nonlinear models in macroeconometrics," CREATES Research Papers 2017-32, Department of Economics and Business Economics, Aarhus University.
    21. Fabrizio CORICELLI & Bostjan JAZBEC & Igor MASTEN, 2004. "Exchange Rate Pass-Through in Acceding Countries: The Role of Exchange Rate Regimes," Economics Working Papers ECO2004/16, European University Institute.
    22. Hans Christian Kongsted, 2002. "Testing the Nominal-to-Real Transformation," Discussion Papers 02-06, University of Copenhagen. Department of Economics.
    23. Lee, Chien-Chiang & Chen, Pei-Fen & Chang, Chun-Ping, 2007. "Testing linearity in a cointegrating STR model for the money demand function: International evidence from G-7 countries," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 76(4), pages 293-302.
    24. Castle, Jennifer L. & Hendry, David F. & Martinez, Andrew B., 2023. "The historical role of energy in UK inflation and productivity with implications for price inflation," Energy Economics, Elsevier, vol. 126(C).
    25. Neil R. Ericsson & Steven B. Kamin, 2008. "Constructive data mining: modeling Argentine broad money demand," International Finance Discussion Papers 943, Board of Governors of the Federal Reserve System (U.S.).

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