The Demand for Money: Some Evidence from Western Europe *

Although there is considerable agreement on the general form of empirical money-demand functions, debate continues on the question of how best to measure the variables and, consequently, on what are the true magnitudes of demand elasticities *. For the most part, this debate has been based on data for the U. S., with some studies for Canada, the U. K., and a few other economies, some of which are in an early stage of development, and others of which were experiencing hyper-infla-tion. The purpose of the present paper is to extend this evidence by presenting de-mand functions estimated from data for ten continental European economies and Ireland for the period 1957-72 2. Money demand hypotheses are developed in Sec-tion I and the empirical results are presented and discussed in Section II. I. The Demand for Money Function Most empirical studies have expressed the quantity of money demanded as a function of the scale of financial activity and the cost of holding highly liquid assets