The Evolution of Inflation in Romania and the Republic of Moldova from 2015 to 2020

Abstract

Inflation is a macroeconomic imbalance, a negative effect of the problems encountered by a national economy. The inflation process manifests differently from one state to another, and the occurrence of a new, unpredictable factor, as is the COVID-19 pandemic, may lead to major changes in an economy. The aim of this paper is to highlight the role of inflation in an economy, and, at the same time, to show how this process may change over time, under the influence of various factors. The analysis of the inflation measurement indices has proven the way in which the COVID-19 pandemic has influenced an EU country, namely Romania, and a non-affiliated state, the Republic of Moldova. The social and economic effects of the inflation process in the two states have also been analyzed, the conclusion that can be drawn being that inflation is regarded as a negative process because it leads to decreases in population welfare through higher prices and lower incomes, respectively, and through the considerable decrease of entrepreneurial competitivity, fewer exports and investments. Such negative outcomes resulting from the inflation process may be contained, to a certain extent, through the direct involvement of the state, imposing anti-inflation policies appropriate for the situation in place at a certain moment.

Although the inflation process cannot be always contained or avoided, its monitoring is still possible, in order to have its effects limited, and every state must possess policies in this regard, since the occurrence of an unpredictable factor, as was the COVID-19 pandemic, may lead to serious consequences at the societal level.