Munich Personal RePEc Archive

A P* Model of Inflation in Puerto Rico

Rodríguez, Carlos A. (2004): A P* Model of Inflation in Puerto Rico. Published in: American Review of Political Economy , Vol. 2, No. 2 (September 2004): pp. 16-41.


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One can analyze and forecast the inflationary potential in the Puerto Rican economy using the “P* model.” Given the nature of the monetary sector in Puerto Rico (PR), the model is put into the context of variables from the mainland United States (US). The results indicate a long-run relationship between the money supply (M1) of the US and the price level in PR, between M1 and real production in PR, and between M1 and the prime rate in PR. The implications for forecasting and policy are discussed.

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