Price Pressure Gaps: An Application of P* Using Korean Data

Richard Haas and Robert Corker

No 1991/026, IMF Working Papers from International Monetary Fund

Abstract: This paper presents estimates of a price-pressure indicator for Korea. It does this by constructing measures of how much M2 velocity and output differ from their long-term values. This, in turn, involves estimating a demand for money function in an error correction framework in which interest rates in the unorganized money market help to account for the effects of ongoing financial liberalization. An equation explaining the Korean inflation rate is identified in which both the monetary variable--the velocity gap--and the real variable--the output gap--play important roles.

Keywords: WP; money demand; broad money; monetary aggregate; price gap; error correction term; Korea income velocity; Hallman et al error correction price inflation equation; pressure gap; Korea price gap; excess demand; income elasticity; price inflation equation; Personal income; Monetary base; Demand for money; Monetary aggregates; Velocity of money (search for similar items in EconPapers)
Pages: 26
Date: 1991-03-01
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Citations: View citations in EconPapers (5)

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