The Relationship between Inflation, Interest Rate, Unemployment and Economic Growth

Denis Vîntu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a quarterly structural macroeconomic model for the Republic of Moldova, which is known as the macroeconomic data model (MDM). This model can be used to assess economic conditions in the Republic of Moldova, forecast the macro economy, analyze policy options, and deepen our understanding of the functioning of a market economy. Some of the key features of the model are highlighted. First, the report looks at the Moldovan economy as a whole and finds that it is a small and open economy. Second, the model is small enough to be manageable for forecasting and simulation exercises, but still has enough detail for most purposes. Third, the model is designed to have a stable equilibrium over a long period of time, in accordance with classical economic theory, while its short-run dynamics are demand-driven. Fourth, the current version of MDM is mostly backward-looking, i.e. Expectations are influenced by the inclusion of lagged variables. The MDM uses a quarterly frequency data set, which allows for a more detailed analysis of the dynamics. The data is mostly estimated based on historical information. The paper includes stochastic long-run simulation results. The relationship between inflation, interest rates, unemployment and economic growth is important.

Keywords: Republic of Moldova; macroeconometric modelling; open and small economy; inflation; interest rate; unemployment; economic growth; classical economics; Keynesian economics. (search for similar items in EconPapers)
JEL-codes: C13 E21 E30 E41 E44 (search for similar items in EconPapers)
Date: 2022-03, Revised 2022-02
New Economics Papers: this item is included in nep-cis, nep-gro, nep-mac and nep-tra
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Published in Sochi Journal of Economy 2022. 16(1).I(2022): pp. 49-65

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