Money Demand and Inflation in Madagascar

Author/Editor:

Koffie Ben Nassar

Publication Date:

December 1, 2005

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Series:

Working Paper No. 2005/236

Subject:

Demand for money Exchange rate arrangements Exchange rates Inflation Monetary base

English

Publication Date:

December 1, 2005

ISBN/ISSN:

9781451862553/1018-5941

Stock No:

WPIEA2005236

Pages:

25

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