Abstract

VALENCIA ROMERO, Ramón; GONZALEZ MOYA, Jorge Andrés  and  RIOS BOLIVAR, Humberto. Money demand and bank deposits in Mexico. Inv. Econ [online]. 2020, vol.79, n.314, pp.75-105.  Epub Jan 29, 2021. ISSN 0185-1667.  https://doi.org/10.22201/fe.01851667p.2020.314.76617.

Considering that the variables economic activity and opportunity cost of holding money affect money demand (M1), their effect on deposits at the Mexican banking system is analyzed for the period 2006-2018. For the first time ever, M1 is introduced as a determinant of bank deposits. A Vector Autoregressive Model is used to assess cointegration. Error Correction Models were used. We concluded that bank deposits were not determined by the variable economic activity (IGAE), the rate of inflation nor the bank funding rate, but by some opportunity cost variables. The role of M1 stands out as a determinant of bank deposits. Finally, a stable behavior of bank deposits is obtained. Stability is analyzed using a Regime Switching-Model, two regimes are identified, high and low volatility, the latter predominates.

Keywords : Money demand; bank deposits; cointegration; Error Correction Model; Regime Switching Model.

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