Research Paper No. 3: Monetary Deficit and Inflation
Summary — This research paper examines the relationship between monetary deficit and inflation in Haiti, covering the period from 1986 to 2015. It uses a vector autoregressive (VAR) model to analyze the impact of monetary policy on inflation, aiming to inform future monetary policy decisions.
Key Findings
- Past credit developments do not directly influence inflation.
- Lagged monetary financing affects the money supply.
- Money supply impacts inflation in the short and medium term.
- The Wallace and Sargent hypothesis is supported in the Haitian context.
Full Description
This research paper investigates the relationship between monetary deficit and inflation in Haiti from 1986 to 2015. It employs a vector autoregressive (VAR) model to analyze the impact of monetary policy on inflation. The study considers the role of budgetary dominance and uses credit to the state as a proxy for monetary financing of the deficit. The findings suggest that past credit developments do not directly influence inflation, but lagged monetary financing affects the money supply, which in turn impacts inflation in the short and medium term, supporting the Wallace and Sargent hypothesis.