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The demand for M0 in the United Kingdom reconsidered: some specification issues

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Norbert Janssen
Abstract

This paper provides tests of an econometric model of the demand for UK M0. The existence of a long-run cointegrating relationship between M0 and key economic variables is established and a plausible dynamic error-correction model is estimated. A model that passes standard specification tests is achieved without resort to arbitrary proxies for financial innovation. Some of the recent decline in M0 velocity is explained by the move to a lower inflation environment.

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Paper provided by Bank of England in its series Bank of England working papers with number 83.

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Handle: RePEc:boe:boeewp:83

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  5. Huizinga, John & Mishkin, Frederic S., 1986. "Monetary policy regime shifts and the unusual behavior of real interest rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 24(1), pages 231-274, January. [Downloadable!] (restricted)
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  6. Breedon, F J & Fisher, P G, 1996. "M0: Causes and Consequences," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 64(4), pages 371-87, December.
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  7. Ireland, Peter N, 1995. "Endogenous Financial Innovation and the Demand for Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 107-23, February. [Downloadable!] (restricted)
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  10. Hester, Donald D, 1982. "On the Adequacy of Policy Instruments and Information When the Meaning of Money Is Changing," American Economic Review, American Economic Association, vol. 72(2), pages 40-44, May. [Downloadable!] (restricted)
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  13. Ryland Thomas, . "The Demand for M4: A Sectoral Analysis Part 2 The Corporate Sector," Bank of England working papers 62, Bank of England. [Downloadable!]
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