The Output-Inflation Nexus in Ukraine: Is there a Trade-Off?

May 1, 1996

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 examines whether expansionary credit policy can help sustain output growth in transition economies, with particular reference to Ukraine’s experience since 1992. We find that, while real credit growth is indeed associated with higher output growth, an increase in the growth rate of nominal credit does not, in general equilibrium, stimulate output growth. Following a short-lived boom — caused by falling real wages — the increase in the growth rate of nominal credit leads to a decline in the level of output.

Subject: Credit, Demand for money, Exchange rates, Foreign exchange, Industrial production, Inflation, Labor, Money, Prices, Production, Real wages

Keywords: broad money, co-integrating relationship, Credit, credit growth, credit to the economy, Durbin Watson statistics, Eastern Europe, error correction terms, exchange rate, Exchange rates, expansionary credit policy, growth rate, Industrial production, Inflation, inflation rate, money demand, nominal credit, output-inflation trade-off, producer price inflation, Real wages, real-credit elasticity, WP

Pages:
36
Volume:
1996
DOI:
https://doi.org/10.5089/9781451973938.001
Issue:
046
Series:
Working Paper No. 1996/046
Stock No:
WPIEA0461996
ISBN:
9781451973938
ISSN:
1018-5941

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