Price Pressure Gaps: An Application of P* Using Korean Data
March 1, 1991
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Summary
This paper presents estimates of a price-pressure indicator for Korea. It does this by constructing measures of how much M2 velocity and output differ from their long-term values. This, in turn, involves estimating a demand for money function in an error correction framework in which interest rates in the unorganized money market help to account for the effects of ongoing financial liberalization. An equation explaining the Korean inflation rate is identified in which both the monetary variable--the velocity gap--and the real variable--the output gap--play important roles.
Subject: Demand for money, Monetary aggregates, Monetary base, Money, National accounts, Personal income, Velocity of money
Keywords: broad money, Demand for money, error correction term, excess demand, Hallman et al error correction price inflation equation, income elasticity, Korea income velocity, Korea price gap, monetary aggregate, Monetary aggregates, Monetary base, money demand, Personal income, pressure gap, price gap, price inflation equation, Velocity of money, WP
Pages:
26
Volume:
1991
DOI:
Issue:
026
Series:
Working Paper No. 1991/026
Stock No:
WPIEA0261991
ISBN:
9781451981728
ISSN:
1018-5941
