The Transactions Demand for Money in Chile
This paper examines the transactions demand for money in Chile over the period from 1986 to 2000. Using systems cointegration methods suggested by Johansen (1995), we find that although macroeconomic data for Chile exhibit strong trend-stationarity during this period it is possible to recover relatively robust single-equation specifications for the transactions demand for money. Error-correction models in which money demand is conditioned on real wealth, the level of economic activity, and the nominal Central Bank policy rate provide robust basis for inference. Controlling for a shift in velocity in the end of 1998 the models exhibit a high-degree of out-of-sample predictive power over the period from 1998 to mid 2000.
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- Arrau, Patricio & De Gregorio, Jose & Reinhart, Carmen M. & Wickham, Peter, 1995.
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- Jose De Gregorio & Peter Wickham & Patricio Arrau & Carmen Reinhart, 1991. "The Demand for Money in Developing Countries; Assessing the Role of Financial innovation," IMF Working Papers 91/45, International Monetary Fund.
- Reinhart, Carmen & Arrau, Patricio & DeGregorio, Jose & Wickham, Peter, 1991. "The demand for money in developing countries: Assessing the role of financial innovation," MPRA Paper 13691, University Library of Munich, Germany.
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- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, April.
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