Towards a Demand for Money Measurement ? Application to the German hyperinflation of the early 1920s

An accounting measure of the demand for money is deduced from the Allais’ “Fundamental Equation of Monetary Dynamics”. Data from German hyperinflation in the early 1920s illustrate the method we propose. The spread between money supply and money demand is found to be rather moderate but is not white noise. Our approach can be applied to any country and over any period, provided that the aggregate expenditure can be approximated using available data. This new way can help improve the estimation of the money demand function while avoiding arbitrary assumptions about the dynamics of the spread between money supply and money demand.