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Demanda de dinero y liberalizacion financiera en Mexico: Un enfoque de cointegracion
[Money demand and financial liberalization in Mexico: A cointegration approach]

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Author Info
L. Arnaut, Javier
Abstract

This paper examines the long run dynamics of Mexico’s money demand using Johansen’s cointegration approach with different specifications. The empirical evidence indicates that real balances, real income and the interest rate are cointegrated in all subperiods. The findings suggest that recent changes in economic policy through financial liberalization affected money demand functions; this due to the fact that income elasticity fell down during the transition through the subperiods, but simultaneously this did not affect the functional stability. The cointegrated coefficient on currency-money ratio (M0/M1) suggests that when the ratio falls, the demand for money falls too. Nevertheless, this last evidence is statistically weak. In addition, it was determined that alternative equations are not better than the conventional ones.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8680.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:8680

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Related research
Keywords: Money demand financial liberalization cointegration error correction mechanism currency-money ratio Mexico

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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  1. Hafer, R W & Jansen, Dennis W, 1991. "The Demand for Money in the United States: Evidence from Cointegration Tests," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 155-68, May. [Downloadable!] (restricted)
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  2. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000. [Downloadable!]
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  3. Arrau, Patricio & De Gregorio, Jose & Reinhart, Carmen M. & Wickham, Peter, 1995. "The demand for money in developing countries: Assessing the role of financial innovation," Journal of Development Economics, Elsevier, vol. 46(2), pages 317-340, April. [Downloadable!] (restricted)
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  4. Leventakis, John A, 1993. "Modelling Money Demand in Open Economies over the Modern Floating Rate Period," Applied Economics, Taylor and Francis Journals, vol. 25(8), pages 1005-12, August.
  5. Arrau, Patricio & De Gregorio, Jose, 1993. "Financial Innovation and Money Demand: Application to Chile and Mexico," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 524-30, August. [Downloadable!] (restricted)
  6. Dennis Hoffman & Robert H. Rasche, 1989. "Long-run Income and Interest Elasticities of Money Demand in the United States," NBER Working Papers 2949, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Neil R. Ericsson, 1998. "Empirical modeling of money demand," Empirical Economics, Springer, vol. 23(3), pages 295-315. [Downloadable!] (restricted)
  8. Cagan, Phillip & Schwartz, Anna Jacobson, 1975. "Has the Growth of Money Substitutes Hindered Monetary Policy?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 7(2), pages 137-59, May. [Downloadable!] (restricted)
  9. Robert Dekle & Mahmood Pradhan, 1997. "Financial Liberalization and Money Demand in ASEAN Countries: Implications for Monetary Policy," IMF Working Papers 97/36, International Monetary Fund.
  10. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July. [Downloadable!] (restricted)
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