Money,income and prices in Latin America: An empirical note

Recent papers by Behrman and Vogel, using a simple monetary model, have provided evidence that the price adjustment mechanism in Latin America is characterized by a lagged response to money supply changes which may seriously impede stabilization efforts. In both studies the response to income changes is also drawn out in time. This note re-examines and expands on this evidence, finding that the model only performs well for the high inflation countries and that in these countries price adjustment for both the money supply and real income appears to be virtually complete within the current year.