A substantive model development of NSA narrow money demand in the United Kingdom illustrates the analytical results. Hendry and Ericsson ( 1991b) SA model of narrow money demand appeared well-specified on existing tests, but was found deficient in the presence of the new NSA model. This result demonstrates the value of the new tests and of the NSA data. It also highlights the importance of statistical agencies providing NSA data even if they already provide SA data, since the latter need not be the appropriate data for empirical economic modeling.
Sources. The data sources are: Bank of England Quarterly Bulletin, various issues ( BEQB); Economic Trends Annual Supplement, 1990 Edition, No. 15 (ETAS); Financial Statistics, various issues ( FS); and Monthly Digest of Statistics, various issues ( MDS). The first is a publication of the Bank of England, London; the other three are published by the Central Statistical Office (CSO), Her Majesty's Stationery Office, London. The four-character sequence is the CSO databank series number.
GDP, GDP85, IMP, and IMP85 are from ETAS (Table 3), with minor changes for data revisions from MDS (Table 1.2). M is the M1 series in FS ( January 1989, Supplementary Table S32, Columns 6 [NSA] and 7 [SA]) and BEQB ( November 1989, Table 11.1, Columns 4 [NSA] and 14 [SA]). R3 is from various issues of the BEQB (e.g., May 1989, Table 9.2) and FS (e.g., February 1990, Table 13.14). Rr is zero prior to 1984(3), and as listed in Hendry and Ericsson ( 1991b, Table A.2) thereafter. We are grateful to Stephen Hall at the Bank of England for providing Rr.
All data are quarterly and span 1963(1)-1989(2), unless otherwise noted.
Adjustments. Topping and Bishop ( 1989) document numerous breaks in the series for M1. We account for the four primary breaks in M1, proportionately rescaling data before the break to match the post-break value of M1 for the quarter in which the break occurred. Adjusting the data for these breaks is critical, statistically as well as economically. The breaks range from -1.5% to +6.3%, but <3 + ̂ is only 1.3% in (39) and (41). See also Healeyet al. ( 1990).
Topping and Bishop's breaks are for NSA data, and are reported in Table A2 below. We use the same breaks for SA data, as suggested by Topping and Bishop ( 1989, p. 11).