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Is the Price Elasticity of Money Demand Always Unity?

  • Paul Evans


    (Department of Economics, Ohio State University)

  • Xiaojun Wang


    (Department of Economics, University of Hawaii at Manoa)

Including both monetary gold and nonmonetary gold in a standard money-in-utility model, we establish a presumption that the price elasticity of money demand should be less than one under commodity standards. Applying cointegration methods to data of the world, the United Kingdom, and the United States, we find support for the new theory.

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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200508.

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Length: 11 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:hai:wpaper:200508
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  1. Hendry, David F & Ericsson, Neil R, 1991. "An Econometric Analysis of U.K. Money Demand in 'Monetary Trends in the United States and the United Kingdom' by Milton Friedman and Anna Schwartz," American Economic Review, American Economic Association, vol. 81(1), pages 8-38, March.
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