APPROACHES CONSIDERED IN INFLATION ANALYSIS OVER DIFFERENT TIME HORIZONS BASED ON DATA FROM THE REPUBLIC OF MOLDOVA

This article explores some approaches used for inflation analysis over different time horizons. Over the long-term horizon, inflation is caused by the increase of the money supply, in other words by the monetary policy. Over the short-term horizon, the causes of inflation are analysed in order to understand the nature of the shock, whether it is permanent or temporary. Over the short-term inflation can be caused by excess demand, as well as, by some supply shocks. An accurate identification of the link between aggregate demand and inflation would provide valuable input for policy makers in their attempt to ensure macroeconomic balance and welfare. However, this estimation is a continuous challenge given several factors including the different structure of economies, the degree of price liberalization and the quality of available statistical data. At the same time, for the developing countries, the estimation of the aforementioned relationship is hampered by the significant and rapid changes in the structure of the economies and in their legislative frameworks. In this study, the impact of the aggregate demand deviation from equilibrium levels on the dynamics of core inflation in Moldova was estimated