Analysis of the interdependence between GDP and Inflation

Madalina-Gabriela Anghel, Florin Paul Costel Lilea () and Maria Mirea
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Madalina-Gabriela Anghel: „ARTIFEX” University of Bucharest
Maria Mirea: Bucharest Academy of Economic Studies

Romanian Statistical Review Supplement, 2017, vol. 65, issue 3, 148-155

Abstract: The Gross Domestic Product, considered to be the most complex indicator of results at the level of a country depends, in its chronological evolution, on a series of factors. Thus, it is important to establish the participation of each resource to the formation of GDP, quarterly and/or annually. Also, it is interesting to ascertain what is the structural influence on the evolution of GDP, of all uses, in the analysis of economic growth. As a principle, three possibilities exist. The growth on the expense of consumption consists in the fact that, by increasing consumption, more taxes are collected and, thus, the incomes to the general consolidated budget will grow. Also, the en-gross and retail trade will increase and thus, the gross value added, as source of budget incomes orientation, will grow. The modality to economically increase, in a simpler manner, the GDP, on the basis of consumption, is specific to the countries having a weakly structured economy, with low general incomes at the level of population. In such states, as is Romania, the increase of incomes, especially of the salary (minimum, net average or gross average), leads to the increase of consumption and finally, to economic growth. The second path of economic development is the increase of investments, in general, and especially of the foreign direct investments. The safest way to achieve investments’ growth is the attraction of foreign capital and the access to structural funds, as member of the European Union (UE-28). This alternative is limited and depends on the conditions provided by Romania, the guarantee of foreign investments, of the capital and possibility to regenerate the profit and the realized investments. Therefore, the legal framework, as provision and stability, forms an argument in attracting foreign direct investments. The third variant of economic growth is the mixed on, that is on the basis of correlated increase of consumption and investments depending on the economic potential of the country in that moment. As conclusion, we can state that the increase of GDP is desirable and if a positive evolution is ensured, then economic growth is realized.

Keywords: Gross Domestic Product; inflation; correlation; variable; consumption; investment (search for similar items in EconPapers)
JEL-codes: E31 E60 (search for similar items in EconPapers)
Date: 2017
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