The short run demand for transaction balances in Australia

Abstract

A characteristic of much research in monetary economics in the last few years has been a preoccupation with the stability of the demand for money function, as failure of stability undermines some of the central features of monetarism. A recent summing-up of this research has been that "authors in various countries report that money demand equations estimated in the conventional way have broken down in recent times" (Jonson, 1978, p. 29), with the evidence cited being Adams and Porter (1976) for Australia, Artis and Lewis (1979) for the United Kingdom and Goldfeld (1976) and Enzler et al. (1976) for the United States. Doubt must now exist about the validity of such a conclusion for the United Kingdom as a result of studies by Hendry (1980) and Hendry and Mizon (1978), and the proposition for the United States still seems an open question-see Laidler (1980) for a survey