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UK money demand 1873–2001: a long-run time series analysis and event study

Author

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  • Heino Bohn Nielsen

    (Department of Economics, University of Copenhagen, Copenhagen, Denmark.)

Abstract

This 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.

Suggested Citation

  • Heino Bohn Nielsen, 2007. "UK money demand 1873–2001: a long-run time series analysis and event study," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 1(1), pages 45-61, April.
    • Handle: RePEc:afc:cliome:v:1:y:2007:i:1:p:45-61
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    Citations

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    Cited by:

    1. repec:ebl:ecbull:v:3:y:2007:i:69:p:1-13 is not listed on IDEAS
    2. Johansen, Søren & Nielsen, Morten Ørregaard, 2018. "The cointegrated vector autoregressive model with general deterministic terms," Journal of Econometrics, Elsevier, vol. 202(2), pages 214-229.
    3. Patricia Stefani, 2007. "Financial Development and Economic Growth in Brazil: 1986-2006," Economics Bulletin, AccessEcon, vol. 3(69), pages 1-13.
    4. 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.

    More about this item

    Keywords

    Money demand; The UK; Cointegration; Special events; Event study;
    All these keywords.

    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; State Space Models

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