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Milton FriedmanContributions to Economics and Public Policy$
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Robert A. Cord and J. Daniel Hammond

Print publication date: 2016

Print ISBN-13: 9780198704324

Published to Oxford Scholarship Online: August 2016

DOI: 10.1093/acprof:oso/9780198704324.001.0001

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Milton Friedman as an Empirical Modeler

Milton Friedman as an Empirical Modeler

(p.91) Chapter 6 Milton Friedman as an Empirical Modeler
Milton Friedman

Neil R. Ericsson

David F. Hendry

Stedman B. Hood

Oxford University Press

Milton Friedman began his career as both a statistician and an economist, making original contributions in statistics before focusing on economics. Formative early research experiences led him to accord particular importance to measurement errors; and he was strongly influenced by NBER-style analysis. In that light, this chapter examines Friedman’s approach to empirical modeling and focuses on his study of money demand. Friedman employed both model augmentation and data adjustment, where the latter included phase averaging and adjustments for changing financial sophistication. To illustrate, this chapter re-analyzes the final U.S. money-demand equations in Friedman and Schwartz’s 1982 book Monetary Trends in the United States and the United Kingdom: Their Relation to Income, Prices, and Interest Rates, 1867–1975.

Keywords:   data adjustment, measurement errors, model augmentation, US money demand, phase averaging

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