INTERACTION BETWEEN REAL AND MONETARY SECTORS OF THE ECONOMY IN TERMS OF ECONOMIC INSTABILITY

Ion Partachi and Olga Panis
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Ion Partachi: Academy of Economic Studies, Chisinau, Moldova
Olga Panis: Academy of Economic Studies, Chisinau, Moldova

Journal of Social and Economic Statistics, 2013, vol. 2, issue 2, 7-19

Abstract: This paper is a continuation of an article dedicated to the analysis of monetary policy shocks in the context of the interest rate channel operation in the Republic of Moldova during 2001-2012. This work represents the elaboration of the error correction model, which includes the relationship between the base rate and monetary aggregate M3 and inflation. The analysis, based on interaction and equilibration between the indicators in the real and monetary sector – is relevant in the current conditions of economic instability. As international practice of advanced economies show, there is strong correlation between the level of development of the (monetary) financial sector and economic growth, which is associated with such phenomena as: economic cyclicity, inflation. The present paper proposes the analysis of some transmission effects of monetary shocks, in the context of interaction mechanism of real and monetary sector of the economy. The main analysis and conclusions are based on the implementation of correlation tests, granger causality tests, analysis of variance decomposition of forecast and error correction model

Keywords: Economic instability; Aggregate demand; Transmission monetary effects; Potential GDP; Impulse – response; Vector error correction; Forecast error variance decomposition (search for similar items in EconPapers)
JEL-codes: C32 E31 P24 (search for similar items in EconPapers)
Date: 2013
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