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

  • 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.

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
Section
Articles