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A Note on the Competing Causes of High Inflation in Bulgaria during the 1990s: Money Supply or Exchange Rate?

Author

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  • Sébastien Charles

    (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis)

  • Jonathan Marie

    (CEPN - Centre d'Economie de l'Université Paris Nord - LABEX ICCA - UP13 - Université Paris 13 - Université Sorbonne Nouvelle - Paris 3 - CNRS - Centre National de la Recherche Scientifique - UPCité - Université Paris Cité - Université Sorbonne Paris Nord - CNRS - Centre National de la Recherche Scientifique - Université Sorbonne Paris Nord)

Abstract

This note aims at analyzing Bulgaria's high inflation regime during the 1990s. Two competing causes of high inflation are explored: changes in the rate of growth of the money supply in the economy and changes in the foreign exchange rate. Both correspond to traditional theoretical explanations: the monetarist view and the balance of payments approach. Evidence suggests that a variation in the exchange rate is significant in explaining the high inflation regime in Bulgaria whereas monetary growth appears to be insignificant. Consequently, the paper underlines the importance of stabilizing the exchange rate in the short run in order to avoid high inflation.

Suggested Citation

  • Sébastien Charles & Jonathan Marie, 2020. "A Note on the Competing Causes of High Inflation in Bulgaria during the 1990s: Money Supply or Exchange Rate?," Post-Print hal-02962539, HAL.
    • Handle: RePEc:hal:journl:hal-02962539
    DOI: 10.1080/09538259.2020.1787002
    Note: View the original document on HAL open archive server: https://hal.science/hal-02962539
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