Towards an Estimation of Money Demand with Forecasting Purposes: Argentina, 1993-2005
AbstractThis paper aims at producing forecasts of monetary aggregates which are useful in formulating monetary policy in Argentina; in particular, forecasts that allow evaluation of alternative economic scenarios, with a 5-quarter horizon and of both public and private monetary aggregates. With that aim, relationships between different aggregates – currency, M1*, M2*, M3*- and two of their determinants (GDP and interest rates) are estimated. The period selected (1993-2005) spans two different macroeconomic regimes, something problematic when analyzing long-run relationships: coefficients differ from those suggested by economic theory; and cointegration relationships are not stationary. In contrast, short-term models are estimated that exhibit acceptable goodness-of-fit, and evidence of stable parameters. In-sample forecasts do not display errors significantly different from zero, and observations between 2004:III and 2005:III are included within one-standard deviation confidence intervals. Additionally, forecast unbiasedness is obtained. Thus, models show good forecast capacity. However, taking into account the Central Bank’s aims and constraints, more demanding criteria should be applied: although forecast errors are not significant, they turn more persistent as the forecast horizon is extended; and they currently seem to indicate underestimation of narrow aggregates and overestimation of broad ones. Such behavior may be related to more “cash-intensive” money holdings after the crisis. An adjustment to forecasts is proposed in order to deal with this problem. The models obtained can be used to evaluate whether a given monetary target is consistent with a certain macroeconomic scenario, using as inputs variables whose forecasts can be obtained from models developed at BCRA.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Central Bank of Argentina, Economic Research Department in its journal Ensayos Económicos.
Volume (Year): 1 (2006)
Issue (Month): 45 (October)
Argentina; forecasts; monetary aggregates; monetary policy; money demand;
Find related papers by JEL classification:
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Markus Knell & Helmut Stix, 2004. "Three Decades of Money Demand Studies. Some Differences and Remarkable Similarities," Working Papers 88, Oesterreichische Nationalbank (Austrian Central Bank).
- Pedro Elosegui & Guillermo Escudé & Lorena Garegnani & Juan Martín Sotes Paladino (ed.), 2007. "A Small Economic Model for Argentina," BCRA Paper Series, Central Bank of Argentina, Economic Research Department, number 03, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Federico Grillo).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.