On the shock-absorption view of money: international evidence from the 1960s and 1970s.

The findings have important implications for the empirical work on the money demand schedule, i.e. it seems that the conventional equation leaves much too much in the disturbance term. Moreover, expectations of future monetary injections are highly important for the current demand for money.
The above points are discussed in the following order. Section II provides an evaluation of the current shock-absorption view of money on which the present work is based. In Section III, a microeconomic approach is provided to rationalize the shock-absorption view of money under exogenous money supply injections. Implications for empirical work will be discussed. The testable form of the model is derived in Section IV. The empirical results are reported in Section V for five economies: West Germany, Australia, the USA, Finland and Sweden. The final section summarizes the results. [ABSTRACT FROM AUTHOR]