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

FIORITI, ANDRÉS; DELBIANCO, FERNANDO; CARLOS DABÚS

Revista de Analisis Economico

Universidad Alberto Hurtado

Lugar: Santiago de Chile; Año: 2016 vol. 31 p. 59 - 74

0716-5927

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.