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The Monetary Causes of Inflation in Romania

Author

Listed:
  • Paun, Cristian

    (Academy of Economic Studies)

  • Topan, Vladimir

    (Academy of Economic Studies)

Abstract

Inflation is considered one of the most sensitive macroeconomic phenomena in modern economies (inducing significant distorsions in the productive structure of the economy and social injustice in the market). Three of the most important theories that explain the nature and the causes of inflation are: the Keynesian approach that considers inflation as an effect of higher costs or as one of the demand side (an increase in money supply, according to Keynes, will lead to an increase in the volume of transactions due to an extra demand that will push the economy closer to full employment); the monetarist approach (starting with Fisher) that approximates inflation through an index of prices and considers it a result of changes in the velocity of money, transactions volume and the money supply (M x V = p x T); and the Austrian approach that defines inflation exclusively as a monetary phenomenon and a result of expansionary monetary policies of the Central Banks. Based on these main theories, the present paper analyzes the relationship between broad money dynamics and CPI, in order to ilustrate the monetary causes of inflation in Romania.

Suggested Citation

  • Paun, Cristian & Topan, Vladimir, 2013. "The Monetary Causes of Inflation in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 5-23, March.
    • Handle: RePEc:rjr:romjef:v::y:2013:i:1:p:5-23
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    File URL: http://www.ipe.ro/rjef/rjef1_13/rjef1_2013p5-23.pdf
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    References listed on IDEAS

    as
    1. Helge Berger & Pär Österholm, 2011. "Does Money Growth Granger Cause Inflation in the Euro Area? Evidence from Out‐of‐Sample Forecasts Using Bayesian VARs," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 45-60, March.
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    Cited by:

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    4. Claudiu Tiberiu Albulescu & Daniel Goyeau & Cornel Oros, 2015. "On the Long Run Money-Prices Relationship in CEE Countries," Economic Research Guardian, Weissberg Publishing, vol. 5(1), pages 73-96, June.

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    More about this item

    Keywords

    inflation; monetary policy; central bank; broad money;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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