The local stellar kinematics of the Milky Way offer a useful tool for
studying the rotation curve of the Galaxy. These kinematics - usually
parametrized by the Oort constants A and B - depend on the local gradi
ent of the rotation curve as well as its absolute value (Oo), and the
Sun's distance to the Galactic Centre (Ro) The density of interstellar
gas in the Milky Way is shown to vary non-monotonically with radius,
and so contributes significantly to the local gradient of the rotation
curve. We have therefore calculated mass models for the Milky Way tha
t include this component, and have derived the corresponding radial va
riation in the Oort constants. Between 0.9R(0) and 1.2R(0) the Oort fu
nctions A(R) and B(R) differ significantly from the general similar to
Theta(0)/R dependence. Various previously inexplicable observations a
re shown to be consistent with these new predictions. For example, the
se models may explain the similar to 40 per cent difference between th
e values for 2AR(0) derived from radial velocity data originating in t
he inner and outer Galaxy. They also go some way toward explaining the
different shapes of the velocity ellipsoids of giant and dwarf stars
in the solar neighbourhood. However, a consistent picture only emerges
if one adopts small values for the radius of the solar circle (R-0 =
7.1 +/- 0.4 kpc) and local circular speed (Theta(0) = 184 +/- 8 km s(-
1)). With these Galactic constants the rotation curve of the Milky Way
declines slowly in the outer Galaxy; V-rot(20 kpc) = 166 km s(-1). Ou
r low value for the distance to the Galactic Centre agrees well with t
he only direct determination of Ro (7.2 +/- 0.7 kpc). Using these Gala
ctic constants, we also find that the proper motion of Sgr A is consi
stent with the observational constraints. Simple analytic arguments as
well as detailed calculations show that the radial velocities and pro
per motions of our best-fitting model are entirely consistent with the
radial velocities of Cepheids and the Hipparcos measurements of their
proper motions.