In this paper, the author obtains and interprets estimates of short- and long-run demand for money in the United King dom in the period 1871-1913 utilizing high-quality data on broad money and its determinants and applying recent econometric techniques. A unique, theoretically consistent long-run function is estimated as well as a short-run dynamic demand function that is formally superio r to a number of previous estimates. Copyright 1993 by MIT Press.

The authors use the comparative behavior of real output growth and inflation behavior of members and nonmembers of the exchange rate mechanism (ERM) to analyze the importance of ERM membership on macroeconomic performance. An econometric procedure for identifying temporary and permanent shocks to output is proposed and executed. The results confirm that the ERM has acted as a vehicle for macropolicy coordination between members. The authors also investigate several issues relating to the hypothesis of global economic 'tri-polarity' between the United States, Germany, and Japan. Copyright 1995 by MIT Press.

This paper examines the demand for money under conditions of very high inflation in Argentina, Bolivia, Brazil, Chi le, and Peru during the 1970s and 1980s. The authors test whether the monetary and inflationary experiences of these countries can be adequately characterized by the Cagan (1956) model, using an econometric procedure that is not reliant on any particular assumpti on concerning expectations formation except that forecasting errors are stationary. The authors also examine the importance of foreign asset substitution in domestic portfolios and the hypothesis that monetary policy was tantamount to maximization of the inflation tax revenue before testing the rational expectations hypothesis. Copyright 1993 by MIT Press.

We analyze the degree of policy convergence of EMS member countries relative to that of some non-EMS countries. Interestingly, we find convergence for the nominal and real exchange rates and money supplies of the EMS members but not for the non-EMS countries. We also provide some evidence to support the "German leadership hypothesis" in the context of intra-EMS monetary policy convergence.

This paper aims to assess the impact of the abolition of U.K. exchange control on the degre of integration of U.K. and overseas stock markets. Using cointegration techniques, we find that although there is no significant increase in the correlation of short-run stock market returns for the United Kingdom and certain overseas markets post 1979, there does appear to be a marked increase in the degree to which these markets move together in the long run after this date--there appears to be no long-run gain from diversification. Since cointegration of two variables implies that at least one of them can be used to help forecast the other, our findings also imply the inefficiency of a number of stock markets. Copyright 1989 by MIT Press.

We develop a framework to extract information regarding subsequent spot rate movements from the term structure of forward exchange premiums while admitting possible deviations from rationality and the presence of risk premiums. Using weekly dollar–sterling, dollar– mark, and dollar–yen data, the restrictions implied by our framework are not rejected, and spot and forward exchange rates together are well represented by a vector error correction model (VECM). Dynamic out-of-sample forecasts up to one year ahead indicate that the VECM is strikingly superior to a range of alternative forecasts, including a random walk and standard spot-forward regressions.