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Modeling the Causes of Inflation in Romania

Author

Listed:
  • Constatin MITRUȚ

    (The Bucharest Academy of Economic Studies)

  • Mihaela GRUIESCU

    (The Romanian - American University)

  • Roxana Cristina VÎLCU

    (The Bucharest Academy of Economic Studies)

Abstract

In this paper, we analyze the main causes of inflation in Romania in the period 2007-2013. Determining the causes of inflation requires a thorough analysis to identify anti-inflationary measures and to assess possible future effects on prices as well. The proposed econometric methods analyze on one hand the impact and the extent to which prices are influenced by monetary factors and production, and by salaries and the exchange rate, on the other hand. We also analyze several models containing the main macroeconomic variables which have a direct impact on inflation and also within these models we find patterns in various economic interdependences. From the six estimated models, only two of them meet the criteria of the VAR method used in our study and the main lessons drawn from data modeling are: the money supply, the index of producer prices and the inflation CORE2 are the main sources of variation in industrial prices; after their own shocks, the monetary factors have a significant impact on prices, primarily on the production prices and later on the industry prices, whereas the salaries and exchange rate have little impact and do not account for the inflation in our country during the investigated period.

Suggested Citation

  • Constatin MITRUȚ & Mihaela GRUIESCU & Roxana Cristina VÎLCU, 2017. "Modeling the Causes of Inflation in Romania," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(3), pages 21-38.
    • Handle: RePEc:cys:ecocyb:v:50:y:2017:i:3:p:21-38
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    References listed on IDEAS

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    1. repec:zbw:bofitp:2001_016 is not listed on IDEAS
    2. Ms. Laura Papi & Ms. G. C. Lim, 1997. "An Econometric Analysis of the Determinants of Inflation in Turkey," IMF Working Papers 1997/170, International Monetary Fund.
    3. Pelinescu, Elena & Turlea, Geomina, 2004. "Modeling Inflation In Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 1(4), pages 68-86, December.
    4. Mihaela Simionescu (Bratu), 2014. "The Bayesian Modelling Of Inflation Rate In Romania," Romanian Statistical Review, Romanian Statistical Review, vol. 62(2), pages 147-160, June.
    5. Mr. Angel J. Ubide, 1997. "Determinants of Inflation in Mozambique," IMF Working Papers 1997/145, International Monetary Fund.
    6. Vasile COCRIŞ & Anca Elena NUCU, 2013. "Interest rate channel in Romania: assessing the effectiveness transmission of monetary policy impulses to inflation and economic growth," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(579)), pages 37-50, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    inflation; salaries; money; foreign exchange; VAR method.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other

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