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Since the end of World War II, there has been a trend decline in the demand for real currency balances. Part of the decrease is due to the rise in interest rates to unprecedented heights. Yet, this is not the complete answer, since a trend term included in a simple and conventional currency demand equation that already includes an interest rate still emerges with a significant negative coefficient. For example, using quarterly data from 1950.I to 1981.III, a demand for currency equation can be estimated as
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Ochs et al. (1983) studied this question.
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