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A Monetary Approach to the Analysis of Inflation in Ireland


  • Kenny, Geoff

    (Central Bank and Financial Services Authority of Ireland)

  • McGettigan, Donal

    (Central Bank and Financial Services Authority of Ireland)


This paper formulates a simple monetary model to analyse the role of money in the determination of inflation in Ireland. The model suggests that monetary disequilibrium can affect inflation directly via the exchange rate and indirectly by increasing the rate of inflation in the non-traded relative to the traded sector. Econometric results support the proposition that monetary disequilibrium has impacted positively on the rate of inflation in Ireland. A measure of monetary imbalance is shown to add significantly to the information provided by purchasing-power-parity and real-wage error correction mechanisms in the analysis of inflation. However, the impact of monetary disequilibrium would appear to have been much more significant during the early 1980s.

Suggested Citation

  • Kenny, Geoff & McGettigan, Donal, 1997. "A Monetary Approach to the Analysis of Inflation in Ireland," Research Technical Papers 4/RT/97, Central Bank of Ireland.
  • Handle: RePEc:cbi:wpaper:4/rt/97

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    References listed on IDEAS

    1. Callan, Tim & FitzGerald, John, 1989. "Price Determination in Ireland: Effects of Changes in Exchange Rates and Exchange Rate Regimes," Papers ME179, Economic and Social Research Institute (ESRI).
    2. Kenny, Geoff & McGettigan, Donal, 1996. "Non-Traded, Traded and Aggregate Inflation in Ireland: Further Evidence," Research Technical Papers 5/RT/96, Central Bank of Ireland.
    3. Blejer, Mario I., 1979. "On causality and the monetary approach to the balance of payments : The European experience," European Economic Review, Elsevier, vol. 12(3), pages 289-296, July.
    4. Kenny, Geoff & McGettigan, Donal, 1996. "Non-Traded, Traded and Aggregate Inflation In Ireland (Part 2)," Research Technical Papers 3B/RT/96, Central Bank of Ireland.
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    Cited by:

    1. Kenny, Geoff & Meyler, Aidan & Quinn, Terry, 1998. "Bayesian VAR Models for Forecasting Irish Inflation," MPRA Paper 11360, University Library of Munich, Germany.
    2. Colin Bermingham, 2006. "Employment and Inflation Responses to an Exchange Rate Shock in a Calibrated Model," The Economic and Social Review, Economic and Social Studies, vol. 37(1), pages 27-46.

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