Library Dissertation Showcase

An empirical study on the impact of economic and political uncertainty on the broad and narrow money demand in the United Kingdom

  • Year of Publication:
  • 2021

The money demand is an important topic in economics and different versions of traditional money demand equations have been estimated empirically frequently. This research incorporates the impact of the UK uncertainty, the world uncertainty, and exchange rate variables in the case of the UK money demand equations to provide further insights into the monetary policies. These are all factors that could be influential to the money demand in both the short and long run.

The econometric results show that uncertainty variable mostly has an impact on the money demand in the short run in every case except the world uncertainty with the broad and narrow money demand. This can be expected as the UK uncertainty would arguably provide more of an impact to consumers than World Uncertainty unless it was a huge global event such as the Global Financial Crisis. This occurs because consumers feel it more directly affects them if there is UK uncertainty rather than World uncertainty, this could be from uncertainty around the UK economy, political instability, or even exchange rate instability which has been seen in the past 5 years within the UK.

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