• This is a study by the National Bureau of Economic Research, and has been approved for publication by its board of directors. It will be reprinted in the National Bureau's series of Occasional Papers.

    This study was initiated during the 1958–59 academic year, which I spent as research associate at the National Bureau of Economic Research. Although it is not part of any larger research project at the bureau, the study does bear a close relationship to other bureau work, past and present. Sections III-V are devoted mainly to a detailed treatment of business liquidity along the lines of Friedrich Lutz's Corporate Cash Balances, 1914–43: Manufacturing and Trade (New York, NBER, 1945). Similarly, the analysis of money flows contained herein represents a somewhat different approach to the problems that Morris Copeland treated in his A Study of Moneyflows in the United States (New York: NBER, 1952). And, of course, the velocity estimates from Federal Reserve flow-of-funds accounts would not have been possible without Copeland's innovations in money-flow accounting.

    Among current research activities at the National Bureau, this study relates most closely to Milton Friedman's work on the money stock in the United States. However, Friedman is examining the behavior of money over a much longer time span, mainly in terms of aggregative data, while the present study largely ignores the period before 1939 and places major emphasis on sectoral data.

    Preliminary findings, which have since been amended in some respects, were presented in hearings before the Joint Economic Committee, May 26, 1959 (Employment, Growth, and Price Levels, Hearings, Part IV). I gratefully acknowledge the contributions made to this study by Gary S. Becker, Phillip D. Cagan, Milton Friedman, George Garvy, Anna J. Schwartz, and Martha M. Selden. Thanks are also due to Murray Shields, Willis J. Winn, and Donald B. Woodward, of the National Bureau's board of directors. Joan Tron carefully edited the study, and H. Irving Forman drew the charts. Nancy Byrne ably assisted me by carrying out most of the computations and by offering good advice at many points.