MONEY, INCOME, AND PRICES IN THE UNITED KINGDOM: 1870–1913

This paper examines certain aspects of the operation of the gold standard and its effects on the United Kingdom in the period before World War I. Reduced-form tests and estimates of output and money-demand equations are presented. The major conclusions are (1) Prices and interest rates in the United Kingdom can be represented as being determined independently of the money stock and output in the United Kingdom; and (2) Evidence concerning Lucas's version of the natural-rate hypothesis indicates various inadequacies.