This paper uses recent cointegration test procedures to investigate the underlying economic relationship between real money balances, real income, and interest rates for the United States. Unlike recent studies of money demand, the authors' analysis uses quarterly data spanning the period 1915-88, thus providing a sample encompassing a wide variety of economic experiences. The evidence presented indicates that the broader M2 measure of money is the preferable measure with which to consider the long-run effects of monetary policy.
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Hafer et al. (1991) studied this question.