Lien de causalité entre la quantité de monnaie en circulation et le niveau général des prix à Madagascar

Abstract

Monetary economics, following the transition from barter, gave rise to the concepts of price and inflation. According to the pioneers of quantitative theory such as Azpilcueta, Copernicus, and Bodin, inflation results from an increase in the money supply outpacing production ; an observation made in Europe at the end of the 15th century. This theory was formalized by Irving Fisher in 1911, who emphasized the neutrality of money. In contrast, Schumpeter asserted its non-neutrality through credit-induced economic growth. Later, Friedman (1970) distinguished between long-term neutrality and short-term non-neutrality of money. This study aims to analyze the causal relationship between the M3 money aggregate and the general price level (CPI) in Madagascar from 1993 to 2022 using the Granger causality test (1969) with the EViews software. Four assumptions are made : full employment, exogeneity of money, price flexibility, and monetary illusion. The results show that there is no causal link between M3 and CPI during this period. We did not perform the Johansen cointegration test (1988) or the Engle-Granger Error Correction Model (1987), as the M3 series is integrated of order two (I(2)) and the CPI series is integrated of order one (I(1)). Using the Ordinary Least Squares (OLS) method, a 100% increase in M3 results in only a 1.2% rise in prices. In contrast, GDP increases by 71.26%, confirming the short-term non-neutrality of money. A long-term analysis spanning over 100 years along, a review of medium-term data and the implementation of a well-managed expansionary monetary policy are  recommended