UK Money Demand 1873-2001: A Cointegrated VAR Analysis with Additive Data Corrections
This paper performs a system cointegration analysis of UK money demand based on real money, real income, the opportunity cost of holding money, and inflation for the period 1873 - 2001. As a novelty we account for the effect of the world wars by estimating additive data corrections, allowing observations during the two world wars to be fundamentally different from peace-time observations. We find a single long-run relation, which links velocity to opportunity costs, and a strong link from excess money to inflation. The long-run structures are reasonably stable, although the information in the data is not evenly distributed over time. In particular, it seems important to include information from the episodes of large variations in velocity and interest rates around 1960-1980.
|Date of creation:||Oct 2004|
|Date of revision:|
|Contact details of provider:|| Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark|
Phone: (+45) 35 32 30 10
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:0421. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann)
If references are entirely missing, you can add them using this form.