The P* model as a general identity to analyze and forecast the behavior of the inflation rate in the economy of Puerto Rico
In this work the P* model is used to analyze and forecast the inflation rate in the economy of Puerto Rico. This model is based on two essential points: the first one is to identify the inflationary potential of an economic system through the estimation of the price level to which the inflation tends to adjust in the long run. The second, points that the price level will be adjust, in the long run, to the forecast of the model. Given the way in which the monetary sector in Puerto Rico its constituted, the model needs to complement with U.S.A. monetary variables , such as, monetary supply, to forecast the inflation. The results indicate a long run relationship between the monetary supply of United States (M1) and the price level, the real production and the island s preferential interest rate. The final model is a good representation of the generating process of information (GPI) and it could be used for forecasting purposes. The same predicts the development of inflation better than the two ARIMA models previously selected.
|Date of creation:||Jul 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +322 299 3523
Fax: +322 299 3523
Web page: http://www.eeri.eu/index.htm
More information through EDIRC
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.:
- Hall, Stephen G & Milne, Alistair, 1994. "The Relevance of P-Star Analysis to UK Monetary Policy," Economic Journal, Royal Economic Society, vol. 104(424), pages 597-604, May.
- Jeffrey J. Hallman & Richard G. Anderson, 1993. "Has the long-run velocity of M2 shifted? Evidence from the P* model," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 14-26.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- 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.
- Arnold, Ivo J. M., 1996. "Stochastic trends in the long-run behavior of velocity: A new test of the institutional hypothesis," Journal of Policy Modeling, Elsevier, vol. 18(6), pages 623-641, December.
- Kenneth N. Kuttner, 1989. "Monetary and non-monetary sources of inflation: an error correction analysis," Working Paper Series, Macroeconomic Issues 89-15, Federal Reserve Bank of Chicago.
When requesting a correction, please mention this item's handle: RePEc:eei:rpaper:eeri_rp_2003_06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia van Hove)
If references are entirely missing, you can add them using this form.