QUASI-FISCAL DEFICIT AND MONEY DEMAND IN YUGOSLAVIAS HIGH INFLATION -SOME ECONOMETRIC EVIDENCE

This paper explores the demand for and supply of money in Yugoslavia's high inflation in the 1980's using a model, where both the expected p rice level and the expected real exchange rate determine real money ho ldings. The cointegration analysis employed provides estimates that do not hinge on any particular assumption concerning expectation formati on. The same estimation framework is used to test whether exchange rat e losses borne by the Central Bank caused inflation by increasing the money supply. The results obtained confirm this conjecture. (C) 1995 A cademic Press. Inc.