Monetary disorder and financial regimes - The demand for money in Argentina, 1900-2006

Argentina is a unique experience of protracted economic instability and monetary disorder. In the framework of a long-term view, we investigate the demand for narrow money in Argentina from 1900 to 2006, shedding some light on the existence of money demand equilibria in extremely turbulent economies. The paper examines the effect of monetary regime changes by dealing with the presence of structural breaks in long-run equations. We estimate and test for regime changes through a sequential approach and we embed breaks in long-run models. A robust cointegration analysis can be hence performed in a single-equation framework. We find that estimated parameters are in sharp contrast with those reported in the literature for Argentina, but in line with those reported for industrialized countries, while significant structural breaks appear consistent with major policy shocks that took place in Argentina during the 20th century.