Money Demand and Inflation in Madagascar

Koffie Ben Nassar

No 2005/236, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; real GDP (search for similar items in EconPapers)
Pages: 25
Date: 2005-12-01
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Citations: View citations in EconPapers (11)

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