A Monetary Approach to the Analysis of Inflation in Ireland

Geoff Kenny and Donal McGettigan
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Donal McGettigan: Central Bank and Financial Services Authority of Ireland

No 4/RT/97, Research Technical Papers from Central Bank of Ireland

Abstract: This paper formulates a simple monetary model to analyse the role of money in the determination of inflation in Ireland. The model suggests that monetary disequilibrium can affect inflation directly via the exchange rate and indirectly by increasing the rate of inflation in the non-traded relative to the traded sector. Econometric results support the proposition that monetary disequilibrium has impacted positively on the rate of inflation in Ireland. A measure of monetary imbalance is shown to add significantly to the information provided by purchasing-power-parity and real-wage error correction mechanisms in the analysis of inflation. However, the impact of monetary disequilibrium would appear to have been much more significant during the early 1980s.

Pages: 28 pages
Date: 1997-06
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Citations: View citations in EconPapers (2)

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