Money Demand Estimations in Mexico and of its Stability 1986-2010, as well as Some Examples of its Uses

Antonio Noriega (), Manuel Ramos Francia and Rodríguez-Pérez Cid Alonso

No 2015-13, Working Papers from Banco de México

Abstract: This paper presents an econometric analysis of the demand for the monetary aggregate M1 in Mexico. Using cointegration techniques, we identify both a stable long-run relationship between M1 and its determinants, and a statistically sound single-equation error-correction model. Results are used to carry out the following simple applications: (1) empirical determination of the value and stability of dual inflationary equilibria, given the observed seigniorage levels; (2) calculation of the seigniorage maximizing inflation rate, and (3) analysis of the potential relationship between a measure of excess money and inflation. Results indicate that the low inflation equilibrium is stable, and that the excess money indicator shows, in retrospective, some capacity in predicting inflationary pressures.

Keywords: Demand for money; seigniorage; inflation; dual inflationary equilibria; cointegration; general to specific; money gap (search for similar items in EconPapers)
JEL-codes: C22 C32 E31 E41 H62 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2015-13

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