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Modelling the Demand for M4 in the U.K


  • Hurn, A S
  • Muscatelli, V A


In this paper, the authors report a demand function for M4 which is identified as the key broad aggregate in the current U.K. financial environment. They estimate dynamic equations over the period 1968-92, which impose long-run elasticities obtained from the Johansen maximum likelihood procedure in terms of the now familiar two-stage approach to modeling cointegrated time series. The results indicate that properly specified demand functions yield significant interest rate effects in both the long-run solutions and the short-run dynamics. Furthermore, notwithstanding the institutional changes in the financial sector over the data period, the estimated equation yields stable parameter estimates. Copyright 1996 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Hurn, A S & Muscatelli, V A, 1996. "Modelling the Demand for M4 in the U.K," The Manchester School of Economic & Social Studies, University of Manchester, vol. 64(1), pages 70-78, March.
  • Handle: RePEc:bla:manch2:v:64:y:1996:i:1:p:70-78

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    References listed on IDEAS

    1. Robertson, D & Symons, J, 1994. "Five Weeks in the Life of the Pound. Interest Rates, Expectations and Sterling's Exit from the ERM," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(1), pages 1-12, February.
    2. Levin, Eric J & Copeland, Laurence S, 1993. "Reading the Message from the U.K. Indexed Bond Market: Real Interest Rates, Expected Inflation and the Risk Premium," The Manchester School of Economic & Social Studies, University of Manchester, vol. 61(0), pages 13-34, Suppl..
    3. Woodward, G Thomas, 1990. "The Real Thing: A Dynamic Profile of the Term Structure of Real Interest Rates and Inflation Expectations in the United Kingdom, 1982-89," The Journal of Business, University of Chicago Press, vol. 63(3), pages 373-398, July.
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    Cited by:

    1. Howells, Peter & Hussein, Khaled, 1997. "The demand for money: Total transactions as the scale variable," Economics Letters, Elsevier, vol. 55(3), pages 371-377, September.

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