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"International Evidence on the Demand for
Money," The Review of
Economics and Statistics, August 1987, 473-480.
pdf file (627KB).
One of the current questions in the literature on the demand for money is
whether the adjustment of actual to desired money holdings is in nominal
or real terms. The paper describes a simple procedure that can be used to
test the nominal against the real hypothesis. The test is carried out for
27 countries. The paper also tests the structural stability of the
demand for money equations and the correctness of the dynamic specification.
The results are strongly in favor of the nominal adjustment hypothesis.
There is, however, some evidence of moderate structural instability before
and after 1973. The instability does not affect the conclusion that
the nominal adjustment hypothesis dominates the real adjustment hypothesis.
This paper estimates and analyzes demand for money equations for 27
countries. These countries are part of the MC model. Some of the
results in this paper are updated in Chapter 6, Section 6.7, in