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Monetarism Beyond M1A

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  • Pablo García,
  • Rodrigo O. Valdés

Abstract

This work analyzes, from an empirical standpoint, the information contained in the M1A aggregate in Chile and compares it with other aggregates. The findings reveal that, at least for now, the M1A aggregate does not seem to have particularly valuable information that would make it a better indicator of inflationary pressures within the monetary policy decision horizon. This is consistent with the practice that central banks followed in the past, when they used quantitative targets for money and focused their analyses on broader aggregates. One possible explanation for the excessive importance given in Chile to the monetary aggregate M1A is the history of financial repression that the country lived until the mid-seventies.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 262.

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Date of creation: May 2004
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Handle: RePEc:chb:bcchwp:262

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  1. Gerlach, Stefan & Svensson, Lars E. O., 2003. "Money and inflation in the euro area: A case for monetary indicators?," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1649-1672, November.
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  3. Peter N. Ireland, 2001. "Money's Role in the Monetary Business Cycle," NBER Working Papers 8115, National Bureau of Economic Research, Inc.
  4. Bennett T. McCallum, 2001. "Monetary policy analysis in models without money," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 145-164.
  5. Jose De Gregorio, 2003. "Dinero e Inflación: ¿En Qué Estamos?," Working Papers Central Bank of Chile 201, Central Bank of Chile.
  6. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting "M" back in monetary policy," International Finance Discussion Papers 761, Board of Governors of the Federal Reserve System (U.S.).
  7. Philip Arestis & Malcolm Sawyer, 2003. "Does the stock of money have any causal significance?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 113-136.
  8. De Grauwe, Paul & Polan, Magdalena, 2001. "Is Inflation Always and Everywhere a Monetary Phenomenon?," CEPR Discussion Papers 2841, C.E.P.R. Discussion Papers.
  9. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January.
  10. Klaus Schmidt-Hebbel & Matías Tapia, 2002. "Monetary Policy Implementation and Results in Twenty Inflation-Targeting Countries," Working Papers Central Bank of Chile 166, Central Bank of Chile.
  11. Lippi, Francesco & Neri, Stefano, 2003. "Information Variables for Monetary Policy in a Small Structural Model of the Euro Area," CEPR Discussion Papers 4125, C.E.P.R. Discussion Papers.
  12. Hallman, Jeffrey J & Porter, Richard D & Small, David H, 1991. "Is the Price Level Tied to the M2 Monetary Aggregate in the Long Run?," American Economic Review, American Economic Association, vol. 81(4), pages 841-58, September.
  13. Nelson, Edward, 2003. "The Future of Monetary Aggregates in Monetary Policy Analysis," CEPR Discussion Papers 3897, C.E.P.R. Discussion Papers.
  14. Se Kyu Choi-Ha & Luis Felipe Lagos, 2003. "El Dinero como Indicador Líder," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(120), pages 259-283.
  15. Arturo Estrella & Frederic S. Mishkin, 1996. "Is There a Role for Monetary Aggregates in the Conduct of Monetary Policy?," NBER Working Papers 5845, National Bureau of Economic Research, Inc.
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