Monetary aggregates restored? Capie and Webber revisited: Alec Chrystal and Paul Mizen
Paper prepared for the Festschrift for Forrest Capie held on 4 September 2009 at Cass Business School. We are grateful for comments on an earlier version from David Peel and from conference participants. The aim of this paper is to revisit the UK money supply data and test for some standard relationships between money, the price level and real GDP using (in part) data constructed by Forrest Capie and Alan Webber. We find that there is evidence of a well-determined long-run money demand function and there is a very clear long-run relationship between money, the price level and real GDP. None of this will be a surprise to those who learned their monetary economics in the 1960s and 1970s, but it may be a surprise to those trained in the 1990s and 2000s.