Investigating Croatian Inflation through the Cointegration with Structural Break Approach

Malešević Perović, Lena (2015) Investigating Croatian Inflation through the Cointegration with Structural Break Approach. Journal of Economic and Social Studies, 5 (1). ISSN 1986 – 8502; doi: 10.14706/JECOSS11517

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Abstract

Abstract: This paper analyses the inflationary process in Croatia during the period 1992-2011, using a cointegration with structural break approach. Our results indicate that there is a long-run relationship between inflation, exchange rate, unit labour costs and money growth. Currency depreciation and unit labour costs are found to influence inflation positively, and money supply negatively. We argue that the latter occurs because exchange rate targeting policy in Croatia results in a situation where endogenous money moves in the direction opposite to the exchange rate, so as to keep the exchange rate fixed. We, furthermore provide some evidence that money supply need not mean risks to inflation in the presence of declining money velocity.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Journal of Economic and Social Studies
Depositing User: Mrs. Emina Mekic
Date Deposited: 10 Nov 2014 10:01
Last Modified: 10 Jun 2015 13:25
URI: http://eprints.ibu.edu.ba/id/eprint/2775

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