Are capital inflows in the CR inflationary?

Tomáš Dvořák

Prague Economic Papers, 1996, vol. 1996, issue 1

Abstract: It is evident that the volume of capital inflows in the Czech Republic has had seriously monetary consequences. As shown in the section 2 net foreign assets accounted for most of the growth in the money supply in the Czech Republic during 1993 and 1994. Inflationary effects of capital inflows depend on whether capital inflows are driven by the money demand or by the money supply. The inflows driven by a rightward shift in the money demand function are not likely to result in inflation, while a shift in the money, supply function, caused perhaps by institutional change and greater availability of foreign funds, is likely to put pressure on prices. Empirical investigation of the supply and demand effects attempted to confirm the existence of the supply of money supply function in the Czech Republic. The application of appropriate econometric analysis in the turbulent period of 1992 - 1994 was somewhat problematic.

Date: 1996
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DOI: 10.18267/j.pep.94

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