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Inflación en Uruguay en 140 años de historia (1870-2010). Un enfoque monetario

Conrado Brum, Carolina Román () and Henry Willebald ()

No 14-03, Documentos de Trabajo (working papers) from Instituto de Economia - IECON

Abstract: This paper aims at explaining the long-run inflation of Uruguay (1870-2010). A monetary inflation model is used based on the assumption that the long-run inflation results from the equilibrium conditions in the money market. A forward-looking Phillips curve is estimated where the inflation rate depends positively on the inflation expectations, the output gap and the international inflation. Following the Neumann and Greiber (2004) approach, the inflation expectations is explained by the core money growth, which is defined as the growth of long-lasting component of nominal money supply that exceeds the long-run increase of the real money demand, this last one determined by the change of the potential output (output adjusted core money, OACM). In addition, we compare the OACM with effective inflation and we construct a monetization index which enables us to identify processes of "demonetization" and "monetization" that the Uruguayan economy experienced along the last 140 years. The results of the Phillips curve estimation show a positive and significant effect of the core money growth on the inflation rate. In addition, a unit elasticity of the real money demand is found.

Keywords: inflation; core money; Uruguay (search for similar items in EconPapers)
JEL-codes: E31 E51 N16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lam and nep-mac
Date: 2014-03
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