Monetary Inflation Relationship in Madagscar: a DSGE Model Analysis

Andrianady, Josué R. and Rajaonarison, Njakanasandratra R. (2023): Monetary Inflation Relationship in Madagscar: a DSGE Model Analysis.

Abstract

This work investigates the impact of an increase in the money supply on inflation using DSGE model in Madagascar. The results showed a strong positive correlation between these two variables, confirming the economic theory that an increase in the money supply leads to a proportional increase in inflation. The study also revealed that the increase in the money supply has a significant effect on inflation in the short term, but this effect quickly diminishes and disappears after about twelve quarters.Targeted monetary policies may limit short-term effects on inflation, but strcutural and busgetary policies in the long term are needed to sustainably reduce inflation and promote sustained economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Madagascar, DSGE, Inflation, money, PCA
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies

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