Abstract:

In addition to the ongoing economic burdens caused by the Covid-19 pandemic, there have been additional uncertainties and challenges due to the Russo-Ukrainian war since February 2022. This geopolitical extreme situation not only exacerbates the production problems that have existed for some time as a result of a lack of advance payments or those that do not arrive on time.
This paper poses the causal relationship between inflation and all other macroeconomic effects, whether inflation is caused by deteriorating inflation or excessive monetary growth.
In my paper, I analyze the causality between inflation and inflation uncertainty in Romania. The aim of my paper is to show the inflation significantly Granger-causes inflation uncertainty, according to Friedman's hypothesis. This hypothesis is inspired by Friedman's theory of determining nominal income. In our paper, we examine quarterly data on one-year inflation expectations produced by the National Bank of Romania (BNR) and medium-term inflation expectations withdrawn from four-year bond yields as measures of long-term inflation expectations. My main finding from this investigation is that the inflation trend increases when we would expect people's behavioral rules to adapt to this change in the environment.