Assessing the Stability of Narrow Money Demand in the United Kingdom

11 Pages Posted: 7 Apr 2005

See all articles by Andrew Brigden

Andrew Brigden

Bank of England

Kathryn Grant

Bank of England - Monetary Assessment and Strategy Division

Gertjan W. Vlieghe

Bank of England - Monetary Assessment and Strategy Division

Abstract

It is widely accepted that the introduction of cash-saving technologies, such as credit and debit cards,and the growing network of automated teller machines (ATMs) contributed to a prolonged upward shift in narrow money velocity towards the end of the 20th century. This article considers whether this upward shift might plausibly have come to an end. First, it presents data on four distinct manifestations of financial innovation, and asks whether the pace of change in each might have slowed. Second, it uses time-series data stretching back more than 100 years to present estimates of the demand for narrow money during different time periods. It finds tentative evidence that, since the early 1990s, narrow money velocity has been a broadly stable function of the short-term rate of interest.

Suggested Citation

Brigden, Andrew and Grant, Kathryn and Vlieghe, Gertjan W., Assessing the Stability of Narrow Money Demand in the United Kingdom. Bank of England Quarterly Bulletin, Summer 2004, Available at SSRN: https://ssrn.com/abstract=700121

Andrew Brigden (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Kathryn Grant

Bank of England - Monetary Assessment and Strategy Division

Threadneedle Street
London EC2R 8AH
United Kingdom

Gertjan W. Vlieghe

Bank of England - Monetary Assessment and Strategy Division ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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