Using annual data from Friedman and Schwartz (1982), Hendry and Ericsson (1991a) developed
an empirical model of the demand for broad money in the United Kingdom over 1878-1975. We update
that model over 1976-1993, accounting for changed data definitions and clarifying the concept of
constancy. With appropriate measures of opportunity cost and credit deregulation, the model's parameters
are empirically constant over the extended sample, which was economically turbulent. Policy implications
follow for parameter nonconstancy and predictive failure, causation between money and prices, monetary
targeting, deregulation and financial innovation, and the effect of policy on economic agents' behavior.
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Last update: July 19, 2001