UK money demand 1873–2001: a long-run time series analysis and event study
AbstractThis paper performs a multivariate cointegration analysis of UK money demand 1873–2001, and illustrates how a long-run time series analysis may be conducted on a data set characterized by turbulent episodes and institutional changes. We suggest accounting for the effects of the two world wars by estimating additive data corrections, thereby allowing the propagation of war-time shocks to be fundamentally different from the transmission of peace-time innovations. In addition, the corrected series may be used in counterfactual event studies to assess the impacts of special events. In the empirical analysis we find a single equilibrium relationship relating velocity to opportunity costs, and we identify a significant link between excess money and inflation. After accounting for the turbulent periods, the equilibrium structure is reasonably stable over a period of 130 years.
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Bibliographic InfoArticle provided by Association Française de Cliométrie (AFC) in its journal Cliometrica, Journal of Historical Economics and Econometric History.
Volume (Year): 1 (2007)
Issue (Month): 1 (April)
Money demand; The UK; Cointegration; Special events; Event study;
Find related papers by JEL classification:
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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- Balke, Nathan S. & Ma, Jun & Wohar, Mark E., 2013. "The contribution of economic fundamentals to movements in exchange rates," Journal of International Economics, Elsevier, vol. 90(1), pages 1-16.
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