M0: Causes and Consequences

Francis Breedon and Paul Fisher

The Manchester School of Economic & Social Studies, 1996, vol. 64, issue 4, 371-87

Abstract: This paper addresses some practical issues in understanding the determinants of U.K. M0 (the monetary base) and its informational content. The first three issues relate to the estimation of a demand for M0 equation: explaining the trend in velocity, the choice of scale variable, and the partial response of M0 to changes in interest rates. These issues are explored using annual, quarterly, and monthly data. The final topic is the use of M0 in predicting inflation. The authors' simple tests support the growing literature which suggests that M0 is a relatively good leading indicator of inflation. Copyright 1996 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1996
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Working Paper: M0: Causes and Consequences (1993)
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