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Money Demand and Inflation in Madagascar


  • Koffie Ben Nassar


This paper uses a two-sector model to estimate the relationship between prices, money, and the exchange rate in Madagascar during the period 1982-2004. The estimated model, using quarterly data, finds a stable long-run relationship among monetary aggregates, domestic prices, real income, and foreign interest rates. In addition, the error-correction model shows that changes in the monetary aggregates, the exchange rate, and foreign interest rates exert a significant impact on inflation. The results also suggest that a disequilibrium in the money market has a lasting impact on inflation. The paper concludes with policy recommendations.

Suggested Citation

  • Koffie Ben Nassar, 2005. "Money Demand and Inflation in Madagascar," IMF Working Papers 05/236, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:05/236

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    References listed on IDEAS

    1. Burdekin, Richard C K & Siklos, Pierre L, 1999. "Exchange Rate Regimes and Shifts in Inflation Persistence: Does Nothing Else Matter?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(2), pages 235-247, May.
    2. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    3. Laura Papi & G. C. Lim, 1997. "An Econometric Analysis of the Determinants of Inflation in Turkey," IMF Working Papers 97/170, International Monetary Fund.
    4. Jeanā€Paul Azam, 2001. "Inflation and Macroeconomic Instability in Madagascar," African Development Review, African Development Bank, vol. 13(2), pages 175-201.
    5. Jonathan David Ostry & Anne Marie Gulde & Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 95/121, International Monetary Fund.
    6. Wojciech Maliszewski, 2003. "Modeling Inflation in Georgia," IMF Working Papers 03/212, International Monetary Fund.
    7. Tim Callen & Dongkoo Chang, 1999. "Modeling and Forecasting Inflation in India," IMF Working Papers 99/119, International Monetary Fund.
    8. Mangal Goswami & Oya Celasun, 2002. "An Analysis of Money Demand and Inflation in the Islamic Republic of Iran," IMF Working Papers 02/205, International Monetary Fund.
    9. repec:fth:oxesaf:2001-02 is not listed on IDEAS
    10. Gary G. Moser, 1995. "The Main Determinants of Inflation in Nigeria," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 270-289, June.
    11. Jean-Claude Nachega, 2001. "A Cointegration Analysis of Broad Money Demand in Cameroon," IMF Working Papers 01/26, International Monetary Fund.
    12. repec:fth:oxesaf:2001-2 is not listed on IDEAS
    13. Louis Kuijs, 1998. "Determinants of Inflation, Exchange Rate, and Output in Nigeria," IMF Working Papers 98/160, International Monetary Fund.
    14. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    15. Oral Williams & Olumuyiwa S Adedeji, 2004. "Inflation Dynamics in the Dominican Republic," IMF Working Papers 04/29, International Monetary Fund.
    16. Rodolphe Blavy, 2004. "Inflation and Monetary Pass-Through in Guinea," IMF Working Papers 04/223, International Monetary Fund.
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    More about this item


    Demand for money; Exchange rates; Economic models; Prices; Money demand; Money markets; Monetary policy; Madagascar; Interest rates; Inflation; cointegration; monetary fund; money balances; Exchange Rate;

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