FINANCIAL INNOVATION, INFLATION AND THE STABIHTY OF THE DEMAND FOR BROAD MONEY IN THE UNITED KINGDOM |
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| Authors: | Mark P Taylor |
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| Institution: | Economics Division, Bank of England, and University of Newcastle upon Tyne |
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| Abstract: | This note presents an estimate of a demand function for broad money (£M3) for the UK, 1964ii–1985iv. It shows no sign of structural instability due to Competition and Credit Control, and forecasts well for twenty quarters post-sample (1981i-1985iv). A key innovation is the allowance made for financial innovation by including the interest rate available on new, high-interest chequing accounts in the equation. |
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