The Demand for Money During High Inflation Episodes: Some Latin American Evidenceon the Cagan Model

Mark Taylor and Kate Phylaktis

No 1991/048, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the demand for money under conditions of very high inflation in Argentina, Bolivia, Brazil, Chile and Peru during the 1970s and 1980s. We test whether the monetary and inflationary experiences of these countries can be adequately characterized by the Cagan (1956) model, using an econometric procedure which is not reliant on any particular assumption concerning expectations formation except that forecasting errors are stationary. We also examine the importance of foreign asset substitution in domestic portfolios.

Keywords: WP; forecasting inflation; exchange premium; rate of inflation; expected return; money holding; rate depreciation; money balance; Bolivia program; inflation rate series; money series; Inflation; Government debt management; Foreign assets; Demand for money; Price controls (search for similar items in EconPapers)
Pages: 22
Date: 1991-05-01
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