High Inflation, Price Stability and Hysteresis Effect: Evidence from Argentina

Carlos Dabús (), Fernando Delbianco () and Andrés Fioriti ()
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Carlos Dabús: CONICET IIESS - Departamento de Economía, UNS
Andrés Fioriti: Department of Economics, University of Warwick

Revista de Analisis Economico – Economic Analysis Review, 2016, vol. 31, issue 1, 59-73

Abstract: We estimate a Currency Substitution model for 1980-2013 periods in Argentina. Following the Mongardini and Mueller (2000) specification, our paper studies the persistence of lower demand of local money, or dollarization, by including a hysteresis variable. By applying an ARDL (Auto Regressive Distributed Lags) model, we found a clear ratchet effect, which implies that in the short run agents do not adjust to changes on the fundamentals, leading to a significant hysteresis variable.

Keywords: Hysteresis Effect; Money Demand; Currency Substitution (search for similar items in EconPapers)
JEL-codes: C01 E00 E41 (search for similar items in EconPapers)
Date: 2016
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