Download This PaperAnother Look at Long-Run Money Demand
23 Pages Posted: 13 Jul 2000 Last revised: 13 Jul 2022
Date Written: June 1998
Abstract
This paper investigates the long-run demand for M1 in the postwar United States. Previous studies, based on data ending in the late 1980's, are inconclusive about the parameters of postwar money demand. This paper obtains precise estimates of these parameters by extending the data through 1996. The income elasticity of money demand is approximately 0.5, and the interest semi-elasticity is approximately -0.05. These parameters are significantly smaller in absolute value than the corresponding parameters for the prewar period.
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