In this paper we introduce a class of tentatively plausible, fixed-coefficient models of money demand and evaluate their forecast performance. When these models are re-estimated allowing all coefficients to vary over time, the forecasting performance improves dramatically. Aside from offering...

Among the many troublesome econometric relationships, the demand for money has proved especially recalcitrant, as evidenced by a long history of tinkering with basic specifications, always in response to some recent perceived forecast failure. The shortcomings of this approach and an alternative...