AS WE HAVE PRESENTED Allais’s fundamental equation of monetary dynamics (FEMD) in chapter 5, we have insisted on the fact that this equation is logically independent of Allais’s HRL formulation of the demand for money. Any formulation of the demand for money is indeed liable to be compatible with the fundamental equation of monetary dynamics.

Nevertheless, the HRL formulation of the demand for money and the fundamental equation of monetary dynamics complement each other and are in practice interdependent. Through the coefficient of psychological expansion*Z*, the HRL formulation of the demand for money establishes a link between the sequence