A LINIAR MODEL OF ANALYZING INFLATION IN ROMANIA, BULGARIA, TURKEY AND CROATIA

The study uses a linear model that reviews the connection between inflation rate and a few macroeconomic indicators: Harmonized Index of Consumer Prices (HICP), Gross Domestic Product (GDP) and unemployment (Unempl). The purpose of this study is to discover the influence of these macroeconomic indicators on the inflation rate, taking into consideration a period of ten years: 2000-2010. The analysis approaches this issue from the perspective of two EU member countries: Bulgaria, Romania, and another two countries - EU candidates: Turkey and Croatia. Although the tradeoff between inflation and unemployment has been long discussed, starting with the famous idea of the Phillips curve that has evolved during time (M.Friedman, E.Phelps), economists are still studying this theme in order to find satisfactory explanation for it. In this paper we have tried to find out whether, in the analyzed countries, there is a strong tradeoff between inflation and unemployment, but we also added other variables that influence inflation: the gross domestic product and the previous values of inflation. Our paper started with a study of the economic background of each analyzed country then, we have collected quarterly data from the period of 2000-2010, that we processed using the econometric software Gretl. After building several models for each country we concluded that inflation in Romania and Croatia are influenced by the following variables: GDP and previous HICP, while the values of inflation in the other two countries are affected by more diverse range of independent variables