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Dynamic Specification of The Demand for Currency. An Application of Co-integration Techniques. Argentina 1977-1988

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  • Ahumada, Hildegart

Abstract

This study presents a model of the demand for currency in a complex highly-inflationary enviroment: Argentina 1977-1988. The econometric serach of a model - which can be considered as a satisfactory approximation of the data generating process o real cash balances - focussed, at this stage, on a group of "basics" variables given by usuak economic theories of the demand for money. Firstly, the porpuse is to concentrate on the "long-run" determinants usingt an information set which includes interest rates, domestic prices and transactions. Co-integration technics, proposed by Granger and Engle (1987) are applied in order to evaluate a "long-run" hypothesis. Data information are also used to specify the dynamic of the model following the methodology "general - to - particular" developed by Hendry et. al. The model selected incorporates a linear correction mechanism and an asymetric effect mof inflation. It has a suitable economic interpretation and satisfied a set of criteria to be considered as a "tentative" approximation to be underlying data generating process of real cash balances.

Suggested Citation

  • Ahumada, Hildegart, 1989. "Dynamic Specification of The Demand for Currency. An Application of Co-integration Techniques. Argentina 1977-1988," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 9(1), April.
    • Handle: RePEc:sbe:breart:v:9:y:1989:i:1:a:3079
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    1. Ahumada, Hildegart A, 1985. "An Encompassing Test of Two Models of the Balance of Trade for Argentina," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(1), pages 51-70, February.
    2. Banerjee, Anindya, et al, 1986. "Exploring Equilibrium Relationships in Econometrics through Static Models: Some Monte Carlo Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 253-277, August.
    3. Melnick, Rafi, 1990. "The Demand for Money in Argentina 1978-1987: Before and after the Austral Program," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(4), pages 427-434, October.
    4. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    5. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
    6. Hall, S G, 1986. "An Application of the Granger & Engle Two-Step Estimation Procedure to United Kingdom Aggregate Wage Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 229-239, August.
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