Economics Commons^™

In this paper, we assess the ability of a cash-in-advance model to replicate the behavior of the macroeconomic variables of the Chilean economy for quarterly data spanning between Q1:1986 and Q3:2005. The monetary models that we study are able to replicate the phase shift and correlation with GDP of many macroeconomic variables such as consumption, price level, and productivity. However, there are some other variables in which the model fails; namely, money and work hours. Introducing ”erratic” monetary growth rates improves the ability of the model to replicate the behaviour of consumption. A sensitivity analysis shows that the main determinant …