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Is the Price Elasticity of Money Demand Always Unity?
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Abstract
Including both monetary gold and nonmonetary gold in a standard money-in-utility model, we establish a presumption that the price elasticity of money demand should be less than one under commodity standards. Applying cointegration methods to data of the world, the United Kingdom, and the United States, we find support for the new theory.money demand, price homogeneity, commodity standard