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Nonmonetary Determinants of Inflation in Romania: A Decomposition

  • Felix Hammermann
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    Why is inflation, 15 years after transition started, still considerably higher in Romania than in the eight EU member states (EU-8) that joined in May 2004? Panel estimation based on ten central and eastern European countries allows us to decompose the inflation differential between Romania and the EU-8. The decomposition suggests that neither the revenue, nor the balance of payments, nor the financial stability motive are driving inflation; rather structural differences are at play. The employment motive, together with indicators reflecting the prolonged structural change, explain most of the inflation gap vis-à-vis the EU-8.

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    File URL: https://www.ifw-members.ifw-kiel.de/publications/nonmonetary-determinants-of-inflation-in-romania-a-decomposition/kap1322.pdf
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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1322.

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    Length: 21 pages
    Date of creation: Mar 2007
    Date of revision:
    Handle: RePEc:kie:kieliw:1322
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