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Abstract

This thesis sets out estimates of the money demand and the money supply functions in the United Kingdom over the period 1871-1969. The stability of these functions over time and the precise roles played by income, prices and interest rates, are important considerations in determining whether monetary control is useful and feasible, and whether it is better effected by interest rate or monetary base targeting. Because of their importance, many disparate studies of money demand and supply functions already exist. The contribution of this thesis is, however, novel in two respects. First, the data base used is new, of high quality, and covers a period of history of sufficient length to allow us to assess the stability of money demand and supply over widely differing conditions. Second, the properties of the data are investigated within the framework of a consistent econometric modelling strategy, which starts from a general specification, and lets the data decide which coefficent restrictions should be imposed in order to reach the final functional form.

The main conclusions of this study are: first, stable moeny demand and money multiplier functoins can be identified for the pre World War One and post World War Two periods, but not for the interwar years. Second, although similar in their long run properties, the short run dynamics of these functions differ from period to period, probably because of differing expectations about government policy. Third, both money demand and, more surprisingly, supply prove to be negatively related to the general level of interest reates. The demand function is, however, more elastic so that the money market is stable. Finally, the interest-elasticity of demand has not, as some authors have suggested, become larger over time. In spite of growth in money substitutes monetary control is therefore still feasible.

Publication Type:	Thesis (Doctoral)
Subjects:	D History General and Old World > DA Great Britain H Social Sciences > HG Finance
Departments:	Bayes Business School > Bayes Business School Doctoral Theses Bayes Business School > Finance Doctoral Theses

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