Original scientific paper

Cointegration Approach to Analysing Inflation in Croatia

Lena Malešević-Perović orcid.org/0000-0003-2883-1597 ; Faculty of Economics, SPlit

Abstract

The aim of this paper is to analyse the determinants of inflation in Croatia in the period 1994:6-2006:6. We use a cointegration approach and find that increases in wages positively influence inflation in the long-run. Furthermore, in the period from June 1994
onward, the depreciation of the currency also contributed to inflation. Money does not explain Croatian inflation. This irrelevance of the money supply is consistent with its endogeneity to exchange rate targeting, whereby the money supply is determined by developments
in the foreign exchange market. The value of inflation in the previous period is also found to be significant, thus indicating some inflation inertia.

Keywords

inflation; Croatia; cointegration

Hrčak ID:

39911

URI

https://hrcak.srce.hr/39911

Publication date:

30.6.2009.

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