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Money, Inflation and output in Romania, 1992-2000

  • Nina Budina
  • Wojtek Maliszewski
  • Georges de Menil
  • Geomina Turlea

Money, inflation and output are tested for stationarity, and found to be integrated of order one. We apply the Johansen procedure for cointegration to test for the rank of the matrix of cointegrating relations (one), to test for the weak exogeneity of output (accepted), inflation (rejected) and money (rejected). We interpret the unique cointegrating relationship as an extended Cagan money demand equation, and estimate error correction mechanisms, in which excess supply of real money contributes significantly to the short-run dynamics of inflation and real money. The evidence suggests than in the period considered, including the sub-sample between the liberalisation shocks, inflation was largely a monetary phenomenon.

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Paper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 2002-15.

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Date of creation: 2002
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Handle: RePEc:del:abcdef:2002-15
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