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Forty Years of Empirical Evidence of Cointegration and Nonlinear Equilibrium Correction in UK Money Demand Since the XIXth Century

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  • Álvaro Escribano
  • Juan‐Andrés Rodríguez
  • Miguel A. Arranz

Abstract

Since the seminal contributions of Friedman and Schwartz and of Hendry and Ericsson, instability in money demand has remained a central issue in the literature. This study broadens and generalizes the first evidence for the United Kingdom of stable long‐ and short‐run broad money demand extending back to the nineteenth century. Using nonlinear cointegration and nonlinear equilibrium‐correction methods, we estimate broad money demand over 1877–2023. Our results indicate stable dynamics alongside episodic structural changes linked to excess inflation, defined as inflation approximately 6.5 percentage points above the historical mean rate of 2.2% observed since 1877.

Suggested Citation

  • Álvaro Escribano & Juan‐Andrés Rodríguez & Miguel A. Arranz, 2026. "Forty Years of Empirical Evidence of Cointegration and Nonlinear Equilibrium Correction in UK Money Demand Since the XIXth Century," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 88(4), pages 871-889, August.
    • Handle: RePEc:bla:obuest:v:88:y:2026:i:4:p:871-889
    DOI: 10.1111/obes.70071
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