A remarkable development seen in recent years is the pronounced decline in euro area M1 velocity <i>vis-ý-vis</i> a moderate decline in short-term interest rates, which represent the most natural opportunity cost for M1, suggesting an increase in the interest rate elasticity of M1 demand. In fact,...

Narrow and broad money measures (including Divisia aggregates) have been found to have explanatory power for UK output in backward-looking specifications of the IS curve. In this paper, we explore whether or not real balances enter into a forward-looking IS curve for the UK. To do this, we test...