Stable money demand in Madagascar leads to lower inflation rates.
The article looks at how inflation changed in Madagascar from 1971 to 2000. The researchers used a method called cointegration analysis and error correction modeling to study the data. They found that there is a stable relationship between money demand and inflation in the long term. Money growth affects inflation in the short term, while the exchange rate is influenced by purchasing power. An increase in the exchange rate leads to lower inflation. The researchers also discovered that inflation tends to stay at a similar level over time.