Asymmetric Effects of Inflation in Romania Based on Nonlinear Autoregressive Distributed Lags Approach

The inflation dynamics can be determined by external factors, such as the global economic disturbances causing an economic crisis that also affected Romania, or they can be internal, such as national debt. Among the influencing factors of domestic inflation, the output gap and unemployment are variables frequently used in the analysis of inflation dynamics. The main aim of this chapter is to investigate the asymmetric effects of the output gap and the unemployment gap on the inflation rate in Romania, with the help of quarterly data for the period 2000–2021. To analyze those, as mentioned earlier, the nonlinear autoregressive distributed lags (NARDL) model was applied. The results highlighted the presence of a unidirectional short-term relationship between inflation and the unemployment gap and no relationship between inflation and the output gap.