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

Authors

  • Carlos Dabús CONICET IIESS - Departamento de Economía, UNS
  • Fernando Delbianco CONICET IIESS - Departamento de Economía, UNS
  • Andrés Fioriti Department of Economics, University of Warwick

Keywords:

Hysteresis Effect, Money Demand, Currency Substitution

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.

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Published

2016-04-25

How to Cite

Dabús, C., Delbianco, F., & Fioriti, A. (2016). High Inflation, Price Stability and Hysteresis Effect: Evidence from Argentina. Economic Analysis Review, 31(1), 59–74. Retrieved from https://www.rae-ear.org/index.php/rae/article/view/452

Issue

Vol. 31 No. 1 (2016)

Section

Articles