THE DEMAND FOR BROAD MONEY IN THE UNITED-KINGDOM AND IN WEST-GERMANY - A COMPARATIVE DYNAMIC SHORT-RUN STUDY

This paper examines the short-run adjustment process in the demand for money in the UK and in Germany with a view, particularly, to explorin g the consequences of the different experiences of financial innovatio n in the two countries. Our hypothesis was that interest rate relativi ties might play a larger role in the UK where a major innovation of th e last twenty years has been the rise in the proportion of deposits pa ying market-sensitive interest rates. The estimations of the short-run dynamic equations, which are satisfactory for both countries, confirm ed our view.