The study under discussion here has been financed by the National Bureau of Economic Research and, since 1973, partly by the Alex C. Walker Educational and Charitable Foundation. This paper is not an official publication of the National Bureau; it has not undergone the full critical review accorded NBER studies, and has not been submitted for approval by the Board of Directors of the National Bureau.

¹ See the Appendix for a description of the data, the phase reference dates, and the computation of phase averages and rates of change.

² “England is certainly, in the present times, a much richer country than any part of North America. The wages of labour, however, are much higher in North America than in any part of England … But though North America is not yet so rich as England, it is much more thriving, and advancing with much greater rapidity to the further acquisition of riches” (Smith, AdamThe Wealth of Nations (1776), Cannan ed. [London: Methuen, 1930], pp. 71–72).Google Scholar

³ This estimate of the magnitude of the change in relative financial sophistication of the United States was derived from the coefficient of a dummy variable in statistical regressions that we ran. In regressions based on levels we used a dummy variable taken to equal zero for dates after 1904 and to the number of years elapsing to 1904 for dates before 1904. In regressions based on rates of change, the dummy variable was taken to equal 1 for dates before 1904 and zero for later dates. The value of the dummy ranged from a low of .022 to a high of .032.

⁴ Friedman, M. and Schwartz, A. J.A Monetary History of the Untied States, 1867–1960 (Princeton: Princeton University Press for NBER, 1963), pp. 639Google Scholar, 679–682; idem, “Money and Business Cycles,“; Review of Economics and Statistics, XLV, No. 1, Part 2, Supplement (February year1963), 43–5; Friedman, M.The Demand for Money: Some Theoretical and Empirical Results (New York,NBER, 1959)Google Scholar, Occasional Paper 68, reprinted from Journal of Political Economy, LXVII (August 1959), 327–51.Google Scholar

⁵ See, for example, Laidler, D., “The Influence of Money on Economic Activity: Some Current Problems” in Clayton, G.Gilbert, J. and Sedgwick, R. (eds.), Monetary Theory and Monetary Policy in the 1970's (Oxford: Oxford University Press, 1971), pp. 75–135.Google Scholar

⁶ The slopes of real per capita money balances on real per capita income and of real per capita income on real per capita money balances can be regarded as lower and upper limits of the income elasticity.

⁷ This estimate may be compared with those derived from OEEC estimates of purchasing power exchange rates for 1950 and 1955 for U.S. and U.K. weights, the weights corresponding to the aggregate expenditure pattern of each country. Converted to a 1929 base, the estimates range from $5.45 per £. to $7.95, a range that is generally lower than our estimates but includes them. See Gilbert, Milton and Associates, Comparative National Products and Price Levels (Paris: OEEC, 1958), p. 31.Google Scholar

⁸ See Moggridge, D. E., “British Controls on Long-Term Capital Movements, 1924–1931,” in McCloskey, D. W. (ed.), Essays on a Mature Economy: Britain After 1840 (Princeton: Princeton University Press, 1971), pp. 113–138.Google Scholar

⁹ Changes in nominal income in Canada, for example, are more closely related to changes in the quantity of money in the United States than to changes in the quantity of money in Canada, though still more closely related to a weighted average of the two. See Jenkins, G. P., “The Role of the United States Monetary Stock in a Model of the Canadian Economy,” unpublished paper presented at the Workshop in Money and Banking, University of Chicago, April 1971.Google Scholar

¹⁰ Gould, J. P. and Nelson, C. R., “The Stochastic Structure of the Velocity of Money,” American Economic Review, LXV (June 1974), 405–18.Google Scholar The footnote referred to is on p. 414.