We explore the long-run demand for M1 based on a data set that has comprised 32 countries since 1851. In many cases, cointegration tests identify a long-run equilibrium relationship between either velocity and the short rate or M1, GDP, and the short rate. Evidence is especially strong for the United States and the United Kingdom over the entire period since World War I and for moderate and high-inflation countries.
With the exception of high-inflation countries–for which a “log-log” specification is preferred–the data often prefer the specification in the levels of velocity and the short rate originally estimated by Selden (1956) and Latané (1960). This is especially clear for the United States and other low-inflation countries.
[Working Paper 738](https://doi.org/10.21034/wp.738 "Working Paper 738") is the online appendix for this paper.
An updated version of this paper is available as [Staff Report 587](https://doi.org/10.21034/sr.587 "Staff Report 587").
The updated version of this paper is published in _Journal of Monetary Economics_ (vol. 117, January 2021, pp. 43-63), https://doi.org/10.1016/j.jmoneco.2020.07.003.