Money demand in Honduras: ARDL approach

Abstract

The purpose of the research is to determine the existence of a long-term relationship between the variables of money demand in Honduras represented by the monetary aggregates M1 and M2 and the macroeconomic variables: Exchange Rate, Gross Domestic Product, and Inflation in the period 2002-2021. The theoretical perspective is the development of two econometric models of cointegration in Autoregressive form of Distributed Lags (ARDL). The design is non-experimental and trending. The M1 model was able to demonstrate that there is a long-term relationship between the variables of the model, meaning that the variables manipulated in monetary policy have been able to relate directly to this monetary aggregate. In the long term, the determining variables were the Gross Domestic Product and the Exchange Rate and in the short term it was only the Exchange Rate. The M2 model managed to demonstrate the long-term existence between the variables. In the long term the determining variables were the Gross Domestic Product and the Exchange Rate and in the short term it was the Gross Domestic Product only.