An Econometric Analysis of UK Money Demand In Monetary Trends in the United States and the United Kingdom by Milton Friedman and Anna J. Schwartz
- 1 July 1989
- journal article
- Published by Board of Governors of the Federal Reserve System in International Finance Discussion Papers
- Vol. 1989.0 (355) , 1-59
- https://doi.org/10.17016/ifdp.1989.355
Abstract
This paper evaluates an empirical model of UK money demand developed by Friedman and Schwartz in Monetary Trends... .Testing reveals mis-specification and hence the potential for an improved model. Using recursive procedures on their annual data, we obtain a better-fitting, constant, dynamic error-correction (cointegration) model. Results on exogeneity and encompassing imply that our money-demand model is interpretable as a model of money but not of prices since its constancy holds only conditional on contemporaneous prices.Keywords
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