Nonmonetary Determinants of Inflation in Romania: A Decomposition

Felix Hammermann

No 1322, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

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-?-vis the EU-8.

Keywords: inflation; panel data; transition economics (search for similar items in EconPapers)
JEL-codes: E58 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1322

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