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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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    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, 2008. "Political Instability and Inflation in Pakistan," MPRA Paper 13056, University Library of Munich, Germany, revised 02 Jan 2009.
    2. Égert, Balázs, 2007. "Real Convergence, Price Level Convergence and Inflation Differentials in Europe," Working Papers 138, Oesterreichische Nationalbank (Austrian Central Bank).

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