Money Demand and Inflation in Madagascar
December 1, 2005
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Summary
This paper uses a two-sector model to estimate the relationship between prices, money, and the exchange rate in Madagascar during the period 1982-2004. The estimated model, using quarterly data, finds a stable long-run relationship among monetary aggregates, domestic prices, real income, and foreign interest rates. In addition, the error-correction model shows that changes in the monetary aggregates, the exchange rate, and foreign interest rates exert a significant impact on inflation. The results also suggest that a disequilibrium in the money market has a lasting impact on inflation. The paper concludes with policy recommendations.
Subject: Demand for money, Exchange rate arrangements, Exchange rates, Inflation, Monetary base
Keywords: real GDP, WP
Pages:
25
Volume:
2005
DOI:
Issue:
236
Series:
Working Paper No. 2005/236
Stock No:
WPIEA2005236
ISBN:
9781451862553
ISSN:
1018-5941
