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adjusted for inflation (real output). Thus, at least in the long-term, a coefficient
close to nil is expected.
In the above model, two strong assumptions are being held. First, output is
constrained to gross value added, while intermediate demand is being left out. In
addition, money is treated as an exogenous component
5. Data
Data collection comprises from 1993 to 2014 for the Mexican economy. GDP
adjusted for inflation stands as output. Monetary aggregates were obtained from
Banco de Mexico
, the Mexican Central Bank. During the period under study, the
Mexican economy experienced various setbacks. In graph 1, the GDP growth in
percentages is presented. During 1995, a recession took place, while GDP fell on
average 5.7%. A second contraction which took place from the second quarter of
2001 to the first of 2002, caused a fall in the GDP of -1.2% on average. A third
recession, encompassing 2009 preceded by the last quarter of 2008, caused a
contraction of 4% on average.
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In order to estimate the velocity of circulation, gross output is being used.