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Nonmonetary Determinants of Inflation in Romania: A Decomposition

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  • Felix Hammermann
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    Abstract

    Why is inflation, 15 years after transition started, still considerably higher in Romania than in the eight EU member states (EU-8) that joined in May 2004? Panel estimation based on ten central and eastern European countries allows us to decompose the inflation differential between Romania and the EU-8. The decomposition suggests that neither the revenue, nor the balance of payments, nor the financial stability motive are driving inflation; rather structural differences are at play. The employment motive, together with indicators reflecting the prolonged structural change, explain most of the inflation gap vis-à-vis the EU-8.

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    File URL: https://www.ifw-members.ifw-kiel.de/publications/nonmonetary-determinants-of-inflation-in-romania-a-decomposition/kap1322.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1322.

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    Length: 21 pages
    Date of creation: Mar 2007
    Date of revision:
    Handle: RePEc:kie:kieliw:1322

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    Keywords: inflation; panel data; transition economics;

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    Cited by:
    1. Khan, Safdar Ullah & Saqib, Omar Farooq, 2011. "Political instability and inflation in Pakistan," Journal of Asian Economics, Elsevier, Elsevier, vol. 22(6), pages 540-549.
    2. Balázs Egert, 2007. "Real Convergence, Price Level Convergence and Inflation Differentials in Europe," CESifo Working Paper Series 2127, CESifo Group Munich.

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