Monetary Trends in the United States and the United Kingdom Their Relations to Income, Prices, and Interest Rates
by Milton Friedman and Anna J. Schwartz
University of Chicago Press, 1982
Cloth: 978-0-226-26409-7 | Paper: 978-0-226-26410-3 | Electronic: 978-0-226-26425-7


The special task of this book is to present a statistical and theoretical analysis of the relation between the quantity of money and other key economic magnitudes over periods longer than those dominated by cyclical fluctuations-hence the term trends in the title. This book is not restricted to the United States but includes comparable data for the United Kingdom.


4.4 Appendix

List of Charts

List of Tables


Principal Empirical Findings

1 Scope of the Study

2 The General Theoretical Framework

2.1 The Quantity Theory: Nominal versus Real Quantity of Money

2.2 Quantity Equations

2.3 Supply of Money in Nominal Units

2.4 The Demand for Money

2.5 The Keynesian Challenge to the Quantity Theory

2.6 The Adjustment Process

2.7 An Illustration

2.8 Conclusion

3.1 The Reference Phase Base as the Unit

3.2 Rates of Change Computed from Phase Bases

4 The Basic Data

4.1 United States Data

4.2 United Kingdom Data

5.1 United States and United Kingdom Money Balances at the Beginning and End of a Century

5.2 Long Swings in the Levels of Money, Income, and Prices

5.3 Rates of Change of Money, Income,and Prices

5.4 Conclusion

5.5 Appendix

6 Velocity and the Demand for Money

6.1 Velocity: A Will-o'-the-Wisp?

6.2 Velocity: A Numerical Constant?

6.3 Effect of Financial Sophistication

6.4 Effect of Real per Capita Income

6.5 Effect of Population and Prices

6.6 Effect of Costs of Holding Money

6.7 Effect of All Variables Combined

6.8 Appendix A

6.9 Appendix B

7 Velocity and the Interrelations between the United States and the United Kingdom

7.1 The Reference Chronology

7.2 Correlation of United States and United Kingdom Velocities and Their Determinants

7.3 Role of Common Determinants of Velocity

7.4 Money and Income

7.5 Conclusion

7.6 Appendix

8 Monetary Influences on Nominal Income

8.1 From the Demand for Balances to theBehavior of Nominal Income

8.2 Replacing Yields by Prior Income and Money

8.3 Replacing Prior Income by Prior Money

8.4 Appendix

9 Division of Change in Income between Prices and Output

9.1 Alternative Simple Explanations

9.2 Price and Output Correlations

9.3 The Effect of Lengthening the Period

9.4 Framework for Further Analysis

9.5 Effect of Money and Yields

9.6 Effect of Current and Prior Money and Prior Income

9.7 Effect of Output Capacity and Anticipations:The Phillips Curve Approach

9.8 Effect of Output Capacity and Anticipations:The Approach through Alternative Models of the Formation of Anticipations

9.9 Conclusion

9.10 Appendix

10 Money and Interest Rates

10.1 The Theoretical Analysis

10.2 Average Yields

10.3 A Digression on the Measurement of Yields

10.4 Yields in Subperiods

10.5 Relation between Yields on Nominal and Physical Assets

10.6 Nominal Yields, Price Levels, and Rates of Change of Prices

10.7 Alternative Explanations of the Gibson Paradox

10.8 The Structural Change in the 1960s

10.9 Correlations with Money

10.10 Conclusion

11.1 Past Work on Long Swings

11.2 Are the Swings Episodic or Cyclical?

11.3 The Role of Money in Long Swings

11.5 Summary

12 The Role of Money

12.2 Two Extreme Theories

12.3 The Demand for Money

12.4 Common Financial System

12.5 Dynamic Effects on Nominal Income

12.7 Interest Rates

12.9 Fisher and Gibson

12.10 Long Swings


Author Index

Subject Index