Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129956
Authors: 
Ramos-Francia, Manuel
Noriega-Muro, Antonio E.
Rodríguez-Pérez, Cid Alonso
Year of Publication: 
2015
Series/Report no.: 
Working Papers, Banco de México 2015-14
Abstract (Translated): 
We construct inflation pressure indicators based on the long-run relationship that exists between monetary aggregates and prices, once it is adequately adjusted to account for the scale of transactions, as well as the opportunity cost of holding money. To that end, an extensive long-run econometric analysis of money demand is carried out for Mexico using the monetary aggregate M1. Based on it, two indicators are calculated, the money gap and the m* indicator. Such gap measures deviations of real M1 from its relationship with its long-run determinants. The m* indicator is based on the estimation of the price index which is congruent with the quantity of M1 in the economy once it is adjusted for the long-run tendency of its determinants considering its long-run coefficients. Our results indicate that monetary policy has been congruent with the inflation target of Banco de México.
Subjects: 
money demand
inflation
money gap
autoregressive distributed lag model
cointegration
general-to-specific
stability
structural change
JEL: 
C22
C32
E31
E41
E51
Document Type: 
Working Paper
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