Recent studies by Enzler, Johnson, and Paulus (1976), and Goldfeld (1976) have offered extensive evi. dence consistent with the claim that the demand for money function has shifted. In particular, both of these studies find that specifications of the demand for money equation, when fitted beyond 1973 consistently overpredict the actual demand for money and that the forecast errors are large. However, a recent paper by Hamburger (1977), using an alternative specification of the demand for money, provides evidence that shows improvement over the results given by Goldfeld. Clearly, the resolution of the question of stability has important implications for the appropriate conduct of monetary policy. The purpose of this paper is to show that the conventional demand for money equation which employs permanent GNP instead of measured GNP (as employed by Goldfeld) results in smaller forecast errors when the equation is extrapolated beyond 1973. It is also shown that while this result holds under a variety of parameter estimation techniques, demand equations estimated using more sophisticated techniques appear to perform better. Thus, the evidence in this paper has implications for the appropriate estimation as well as the proper specification of the demand for money. Since the main issue is the stability of the demand for the MI stock of money, the following analysis is restricted to estimating the money demand equation for MI only. There has been little controversy regarding the demand for the broader money stocks, M2 or M3. In section I, we specify our demand for money equation and estimate it using the familiar Cochrane-Orcutt (CORC) technique. We then extrapolate the estimated equation over the 1974:1 to 1979:4 post-sample period. In section II, we reestimate the demand for money using the estimation technique recently developed by Michio Hatanaka (1974) and again examine the postsample forecasts provided by this superior estimation procedure. The implications of these results and the major conclusions of the paper are discussed in section III. I.

THE primary purpose of this work is to conduct an empirical investigation concerning the role of in consumption, and to test a few postulates of the wealth theories of consumption. The opportunity for such an investigation is provided by the recent publication by Kendrick (1976) of annual data on human and nonhuihan for the United States for the period 1929-69. Specifically, the paper (a) provides estimates of a consumption function in which a variable is included in addition to the income variable; (b) compares the responses of consumption expenditures to changes in human and nonhuman and tests empirically Friedman's hypothesis (1957, p. 17) regarding the effect on consumption of an increase in nonhuman relative to total wealth; and (c) throws some light on the stock adjustment' and habit persistence' postulates by reporting estimates for equations in which a lagged consumption term is added to the variables. The organization of the paper follows the aspects stated above. After a discussion of some methodological questions, we provide estimates of the parameters of consumption functions that include as a distinct variable in addition to income, and show that the variable has significant coefficients, and the coefficients look plausible. The income variable coefficients are substantial, and while being consistent with the life cycle' hypothesis are not necessarily inconsistent with Friedman's theory. Next, we discuss the separate effects of human and nonhuman on consumption. The evidence seems to favor Friedman's postulate that an increase in nonhuman wealth, relative to the total, increases consumption. Estimation of separate equations for (a) durable goods and (b) nondurables and services, by including a lagged consumption term in addition to the variables, suggests that the coefficient pattern can be interpreted as indicative of a stronger habit formation' effect for nondurables and services than for durables. A summarizing section concludes the paper.