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About the role of monetary aggregates for monetary policy: the case of Peru


  • Erick Lahura

    () (Departamento de Economía- Pontificia Universidad Católica del Perú)

  • Donita Rodriguez


The purpose of this paper is to analyze the relevance of monetary aggregates for monetary policy as indicators of real activity. The main hypothesis of this paper is that narrow monetary aggregates can help forecasting real output. The empirical analysis combines the time scale decomposition of time series using wavelets and the possible existence of cointegrating relationships between money, output and prices. Using recent Peruvian data, evidence is found to support the proposed hypothesis. In particular, the results suggest the existence of co-integration between non-stationary series built using wavelet filtering. In this context, exogeneity tests reveal that narrow monetary aggregates are weakly and strongly exogenous; i.e., they are helpful for forecasting real output. These results suggest that money has a role for monetary policy as an indicador of real activity.

Suggested Citation

  • Erick Lahura & Donita Rodriguez, 2006. "About the role of monetary aggregates for monetary policy: the case of Peru," Documentos de Trabajo / Working Papers 2005-243, Departamento de Economía - Pontificia Universidad Católica del Perú.
  • Handle: RePEc:pcp:pucwps:wp00243

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    References listed on IDEAS

    1. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
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    Cited by:

    1. Lahura, Erick, 2017. "Monetary Aggregates and Monetary Policy in Peru," Working Papers 2017-003, Banco Central de Reserva del Perú.
    2. Honarvar, Afshin, 2009. "Asymmetry in retail gasoline and crude oil price movements in the United States: An application of hidden cointegration technique," Energy Economics, Elsevier, vol. 31(3), pages 395-402, May.

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