Kiel Working Papers, Kiel Institute for World Economics
No 1322:
Nonmonetary Determinants of Inflation in Romania: A Decomposition
Felix Hammermann
Abstract: 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.
Keywords: inflation, panel data, transition economics; (follow links to similar papers)
JEL-Codes: E58; (follow links to similar papers)
21 pages, March 2007
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