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The Monetary Causes of Inflation in Romania

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  • 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.

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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2013)
Issue (Month): 1 (March)
Pages: 5-23

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Handle: RePEc:rjr:romjef:v::y:2013:i:1:p:5-23

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Keywords: inflation; monetary policy; central bank; broad money;

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References

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  1. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
  2. Dospinescu, Andrei Silviu, 2010. "Measuring Core Inflation in Romania Using the Dobrescu Method – A Comparative Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 308-319, July.
  3. George T. McCandless, Jr. & Warren E. Weber, 1995. "Some monetary facts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11.
  4. Gerald P. Dwyer, Jr. & R.W. Hafer, 1999. "Are money growth and inflation still related?," Economic Review, Federal Reserve Bank of Atlanta, issue Q2, pages 32-43.
  5. Friedman, Milton, 1972. "Have Monetary Policies Failed?," American Economic Review, American Economic Association, vol. 62(2), pages 11-18, May.
  6. Pelinescu, Elena & Caraiani, Petre, 2006. "Does the Inflation Targeting Have a Positive Role upon the Convergence of the Inflation Rate?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 3(3), pages 39-50, September.
  7. Paul De Grauwe & Magdalena Polan, 2005. "Is Inflation Always and Everywhere a Monetary Phenomenon?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 239-259, 06.
  8. Brunner, Karl & Meltzer, Allan H., 1983. "Strategies and tactics for monetary control," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 18(1), pages 59-103, January.
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