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Answer Of An Inflationary Circuit To The Possible Shocks In Economy

Author

Listed:
  • Scutaru, Cornelia

    (Institute for Economic Forecasting, Romanian Academy, Bucharest)

Abstract

The paper argues that inside a transitional economy there are circuits driving processes of self-sustaining the inflationary phenomenon, namely inflationary circuits. The author analyzes the dynamics of the main indicators of inflationary process, emphasizing the interaction between two of the most powerful inflationary circuits, namely the wage inflationary circuit and the exchange rate inflationary circuit. It has investigated the data with the help of an unrestricted VAR using as variables the consumer price index with a fixed base in 1990, the net nominal wage and the exchange rate leu-USD. The author finds that inflation responds strongly to the exchange rate shocks reaching a maximum after six months, the net nominal wage has a sharp increase in the first semester after a shock in the inflation followed by a slow absorption, while the exchange rate reacts strongly in the first 2-3 months and it diminishes afterwards.

Suggested Citation

  • Scutaru, Cornelia, 2001. "Answer Of An Inflationary Circuit To The Possible Shocks In Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 63-77, December.
    • Handle: RePEc:rjr:romjef:v::y:2001:i:3:p:63-77
    as

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    More about this item

    Keywords

    inflation; inflationary shocks; time series models; monetary policy;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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