Company-Sector Money Demand: New Evidence on the Existence of a Stable Long-Run Relationship for the United Kingdom
The U.K. departure from the European Exchange Rate Mechanism has created an urgent need for new indicators of monetary policy stance. Traditional simple sum monetary aggregates have proven unreliable, particularly in the face of the financial innovations of the 1980s. Micro theory suggests that inappropriate aggregation over heterogeneous assets and holders may be to blame. The present paper tests for weak separability of asset groupings for the U.K. company sector. Divisia weighted aggregates are constructed for the resulting narrow and broad groupings. It is shown that stable long run relationships, corresponding to money demand equations, exist for these aggregates. Arbitrary dummies representing financial innovation are not required, in contrast to some other work in this area. Copyright 1994 by Ohio State University Press.
Volume (Year): 26 (1994)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879|
When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:26:y:1994:i:3:p:479-94. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.