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The Correlation between Inflation and Money Supply

Author

Listed:
  • Adina Titei

    (“Ovidius†University of Constanţa, Faculty of Economic Sciences)

  • Nicoleta Ramona Dinu

    (“Ovidius†University of Constanţa, Faculty of Economic Sciences)

Abstract

Inflation is a macroeconomic disequilibrium that affects all households and firms. The aim of our study is to investigate inflation in Romania, the causes that determine it and the relationship between money supply and inflation. There is evidence that inflation in many countries is of monetary origin. We used the data provided by the World Bank and the National Bank of Romania on inflation and broad money as a percentage of GDP. For the period 2005-2021, in Romania the data shows that inflation values do not exceed 10% and do not deviate significantly from the inflation target, while the money supply increases by an average of 11.63% per year. Our paper employs VAR model and endorses the thesis that there is a long-run relationship between inflation and money supply in Romania at a 5% significance level.

Suggested Citation

  • Adina Titei & Nicoleta Ramona Dinu, 2022. "The Correlation between Inflation and Money Supply," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 460-465, September.
    • Handle: RePEc:ovi:oviste:v:xxii:y:2022:i:1:p:460-465
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    More about this item

    Keywords

    inflation; money supply; monetary aggregates; monetarism;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E - Macroeconomics and Monetary Economics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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