Inflation and Money in Ukraine

This paper treats inflation in Ukraine between 1993 and 1996 as an essentially monetary phenomenon: price increases are dtermined in such a way as to bring the real value of the supply of money into balance with real money demand. Cointegrtaion techniques are used to estimate long-run money demand. A vector error correction model explains the month-to-month dynamics of inflation, real money and interest rates. The policy variable which determines the medium term value of inflation is the monetary base.