Selahattin Togay

MONEY-PRICE RELATIONSHIPS UNDER A CURRENCY BOARD SYSTEM: THE CASE OF ARGENTINA

The relationship between money and prices, and the endogenous money hypothesis, is examined within the framework of a currency board-like system by using monthly data for the Argentinean economy in the period 1991–2001. Employing exogeneity tests, the empirical findings support the endogenous money hypothesis for the relationship between monetary variables (M1, M2, monetary base) and the producer price index, but reject it when the consumer price index is used instead as price variable.

Effect of Official Dollarization on a Small Open Economy: Ecuador

This paper investigates the effects of dollarization on the macroeconomic performance of a small open economy, Ecuador, using a time series perspective. More specifically, we investigate how dollarization effects inflation, GDP, inflation uncertainty and money-price relationship in Ecuador. There are four main findings of this study. First, inflation is lower after dollarization. Second, GDP growth is higher after dollarization when several other factors like rising oil prices and increase in the equity markets of emerging economies are controlled. Third, inflation uncertainty measured by inflation variance through GARCH is lower during dollarization. Finally, money supply is endogenous after dollarization and exogenous before dollarization. A new test is proposed and implemented to investigate endogeneity of money. As a result, we conclude that dollarization improved the macroeconomic performance of Ecuador and changed the money-price relationship in Ecuador. The results are robust to different arguments about the empirical methodology.

Efectos de la dolarización oficial en una pequeña economía abierta: el caso de Ecuador

El presente articulo investiga los efectos de la dolarizacion en el desempeno macroeconomico de una pequena economia abierta, la de Ecuador, empleando para ello un analisis de series de tiempo. Especificamente, exploramos como la dolarizacion implementada en este pais afecto la inflacion, el PIB, la incertidumbre inflacionaria y la relacion entre el dinero y el nivel de precios (de aqui en adelante: la relacion dinero-precio). Los cuatro principales hallazgos surgidos de esta investigacion son: 1) la inflacion acusa niveles mas bajos despues de la dolarizacion; 2) el crecimiento del PIB es mas elevado tras la dolarizacion, habiendo controlado previamente algunos factores como los precios del petroleo y el crecimiento del PIB en economias emergentes y latinoamericanas; 3) la incertidumbre inflacionaria, medida a traves de la varianza de la inflacion mediante el metodo GARCH, es mas baja durante el periodo de dolarizacion, y 4) una vez implementada la dolarizacion, la oferta monetaria es endogena, mientras que antes de la misma era exogena. Como resultado de lo anterior, concluimos que la dolarizacion ha mejorado el desempeno macroeconomico de Ecuador, cambiando la relacion dinero-precio en el pais. Los resultados obtenidos son robustos ante varias especificaciones empiricas.