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Money Demand and Inflation in Madagascar

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Author Info
Koffie Ben Nassar
Abstract

This paper uses a two-sector model to estimate the relationship between prices, money, and the exchange rate in Madagascar during the period 1982-2004. The estimated model, using quarterly data, finds a stable long-run relationship among monetary aggregates, domestic prices, real income, and foreign interest rates. In addition, the error-correction model shows that changes in the monetary aggregates, the exchange rate, and foreign interest rates exert a significant impact on inflation. The results also suggest that a disequilibrium in the money market has a lasting impact on inflation. The paper concludes with policy recommendations.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/236.

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Length: 25 pages
Date of creation: 30 Dec 2005
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Handle: RePEc:imf:imfwpa:05/236

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Keywords: Demand for money ; Madagascar ; Inflation ; Prices ; Money markets ; Exchange rates ; Interest rates ; Economic models ;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  5. G. C. Lim & Laura Papi, 1997. "An Econometric Analysis of the Determinants of Inflation in Turkey," IMF Working Papers 97/170, International Monetary Fund.
  6. Rodolphe Blavy, 2004. "Inflation and Monetary Pass-Through in Guinea," IMF Working Papers 04/223, International Monetary Fund. [Downloadable!]
  7. Jean-Claude Nachega, . "A Cointegration Analysis of Broad Money Demand in Cameroon," IMF Working Papers 01/26, International Monetary Fund.
  8. Azam, J.P., 2001. "Inflation and Macroeconomic Instability in Madagascar," Working Papers Series 2001-2, Centre for the Study of African Economies, University of Oxford.
  9. Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997. "Does the Nominal Exchange Rate Regime Matter?," NBER Working Papers 5874, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Burdekin, Richard C K & Siklos, Pierre L, 1999. "Exchange Rate Regimes and Shifts in Inflation Persistence: Does Nothing Else Matter?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(2), pages 235-47, May.
    Other versions:
  11. Wojciech Maliszewski, 2003. "Modeling Inflation in Georgia," IMF Working Papers 03/212, International Monetary Fund. [Downloadable!]
  12. Azam, J.P., 2001. "Inflation and Macroeconomic Instability in Madagascar," Working Papers Series 2001-02, Centre for the Study of African Economies, University of Oxford.
  13. Louis Kuijs, 1998. "Determinants of Inflation, Exchange Rate, and Output in Nigeria," IMF Working Papers 98/160, International Monetary Fund.
  14. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
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