International Evidence on Long Run Money Demand

71 Pages Posted: 1 Aug 2016 Last revised: 31 May 2023

See all articles by Luca Benati

Luca Benati

University of Bern

Robert E. Lucas

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Juan Pablo Nicolini

Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Warren E. Weber

Federal Reserve Bank of Minneapolis

Date Written: July 2016

Abstract

We explore the long-run demand for M1 based on a dataset comprising 31 countries since 1851. In many cases cointegration tests identify a long-run equilibrium relationship between either velocity and the short rate, or M1, GDP, and the short rate. Evidence is especially strong for the United States and the United Kingdom over the entire period since World War I, and for high-inflation countries such as Israel. For low-inflation countries the data often prefer the specification in the levels of velocity and the short rate originally estimated by Selden (1956) and Latané (1960) to either the log-log, or the semi-log ones. This is especially clear for the United States.

Suggested Citation

Benati, Luca and Lucas, Robert E. and Nicolini, Juan Pablo and Weber, Warren E., International Evidence on Long Run Money Demand (July 2016). NBER Working Paper No. w22475, Available at SSRN: https://ssrn.com/abstract=2816749

Luca Benati (Contact Author)

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

Robert E. Lucas

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Juan Pablo Nicolini

Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Warren E. Weber

Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States
612-204-5485 (Phone)
612-204-5515 (Fax)

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