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Harja Eugenia University from Bacu, home address: Decebal street, building 21, A entrance, apt. 8, Bacu, zip code 600283, phone 0744593260, e-mail: In present analysis some theoretical aspects concerning inflation phenomenon signification, the modality in which this is measured in Romania have been presented for the beginning. The main part of the research I wanted to be a concrete analysis of inflations evolution in Romania anterior to October 1990, the moment of prices liberalization and up to the end of 2006, moment in which Romania was integrated in European Union. The analysis based on datas published by official statistics at the end of every year, but also on personal calculations realized with the purpose of obtaining a detailed CPI on main food goods subgroups, non-food and services, highlighting thus a large series of differences between the products prices and services dynamics belonging to the same group. The newness consists especially in this calculation, even though in some extent are damaged by the indexes decimals garbling, that come to highlight some CPIs particularities in the structure, unmentioned so far but on a yearly level. Key words: Consumer Price Index, Inflation, Real increase Inflation represents a continuous, durable, generalized and self-sustained rise of prices from economy, under the conditions of purchase powers decrease of national currency. The main characteristics of the inflation are: continuous rise of prices, currency mass rise, external commerce balances deficit rise, unemployments rise, the population living standards decrease, salaries conflicts frequency for salaries rise, inefficient enterprising bankruptcy, wealth transfer from creditors to debtors. Out of this, inflation may easily be considered the most severe disease of a national economy, damaging the economical life as well as social and politic ones. Due to the fact that main manifestation of inflation consists of generalized rise of the process from economy, worldwide it is measured through inflation rate starting with the calculation of a Consumer Price Index (CPI). The inflation rate is calculated subtracting 100 from CPI (%), and shows the percentage that goods prices and services tariffs that are included in populations consumption in a certain period rose. CPI is a measuring instrument that allows us to measure between two given time periods, the average prices variation of purchased goods and of services tariffs used by people in Romania. Immediately after December 1989 populations demands increased based on salaries rise, but under the conditions of interior productions decrease. This demand was covered through an increased importation, aspect that lead to a deficit of exterior commerce balance, meaning external debts rise. In this period, prices continued to be hold under control, having the advantage of existent resources and by the fact that Romania did not have any external duty at that moment. Unfortunately, instead of taking advantage of this situation, and a rising of economical policy to be applied under the markets economical conditions, where demand meets the offer, the satisfying of population requests has been placed forward in order to exclude any revolutionary manifestation from their side. From this reason, in January-October 1990 prices were maintained constantly, a CPI statistically calculated not being registered. Together with prices liberalization at the 1st of November 1990 a monthly CPI started to be calculated. From that moment on, prices, that were kept constantly until then, started to rise worrisome, population dealing with new aspects, with the fear that their salary allows less and less products and services to be purchased. Thus, in only two months from prices liberalization, inflation rate was 37,7%, a real explosion of prices following the moment. 1991-1993 period is characterized by a hyperinflation in Romania: prices at the end of 1992 were more than 3.2 higher than at the end of 1990, and again at the end of 1992 to be almost tripled, at the end of 1993 to be 3.56 times higher. In other words, during three years, prizes rose in Romania 34 times, under the conditions of a pronounced industrial and agricultural production decrease, of dramatic GIP decrease, and of budgetary deficit rise, of unemployment rates increase. It is the darkest period of Romanian economy, period when all negative factors have damaged the economic state, lot of years being necessary to retrieve these negative effects and to reach the prior condition. In the first two graphics yearly evolution of inflation rate can be followed as well as inflations rate evolution at the end of the year (December as against the anterior December), both reaching their summit in 1993. Inflation at full tilt continues during 1994 also, even though the disinflation process is evident. A stabilization of prices to a 61,7% rate at the end of the year has bees succeeded, but on the background of an unemployment rate of almost 11%. Practically, this period after 1989 can be characterized in Romania at least by the following general aspects: decentralizing of the economy, centralized back then, private economic sectors, completed afterwards with a disorganization at a microeconomic level; increase and maintenance of a high level of unemployment, included between 7-11%; continuous productions decrease without the possibility of reaching the situation before 1990; the loss in the first years of external market with tradition for our country and a difficult rehabilitation in the following periods, in the some time with am exaggerated increase of importation and with a markets invasion of cheep goods and inadequate qualitatively; the increase of budgetary deficit and of countrys external debts; the rise of salaries pressure by unions systems that ask permanently for salaries 817

rise under the conditions of a less and less performance economy, these involving the inflationist snail and leading finally to real population salaries decrease; firms decapitalizing under the inflations conditions; underground economys rise through a higher level of tax avoidance. If up to 1995 National Bank of Romania practiced a restrictive policy concerning credits, through a very high interest, starting with 1995 it reoriented its credits policy by interests decrease. This aspect lead on short term to enterprising debts degree increase, to a labor places rise and immediately to an unemployments rate decrease, the inflation rate coming back in two years to two ciphers. After the election from 1996 a new approach of economical policy is brought in, respectively with budgetary incomes emanated from external loaning, as well as from actives selling, leading towards the end of 1997 to a new inflation rate of 3 numbers, respectively to an increase of 2.5 times of prices during one year period. During 1998-1999 a credit limitation policy is brought into economy, as well as new facilities for direct investments in Romania, leading to an obvious process of disinflation, inflations rate maintaining at the level of two ciphers. Starting with 2000 we deal with another type of fiscal policy, one that encourages both profits reinvestment and exports. In the some time, a reorganization of mining and quarrying system as well as energetic one takes place, diminishing the loses from economy and the existent budgetary deficit. All these measures impose by countrys preparation for adhesion to European Union together with the fiscal and currency ones, leaded to inflations rate decrease up to one level cipher during one year time, starting with 2004. Starting with 2000, inflations rate calculated as yearly average is easily placed over the inflations rate at the end of the year, due to high prices rises registered in the first part of the year.
Fig. 1 Inflation rate's evolution in Romania at the end of the year (%)
50,0 45,0 40,0 35,0 30,0 25,0 20,0 15,0 10,0 5,0 0,0

- detalii -

350.0 300.0 250.0 200.0 150.0 100.0 50.0 37.7 0.0 1990* 1991 1992 1993 1994 1995 1996 1997 61.7 27.8 56.9 295.5 223.8 199.2 151.4

40,7 30,3 17,8 14,1 2003 9,3 2004 8,6 2005

4,87 2006




Total Food

Non-food Services

40.6 54.8 40.7 30.3 17.8 14.1 9.3 8.6 4.87 1998 1999 2000 2001 2002 2003 2004 2005 2006

From the graphic is evident that year 2006 brings the lowest inflation, the inflations rate at the end of the year does not cross 5%, and the yearly average is 6,56%, an unmet level from 1990. The real economic rise process is highlighted by constant positive dynamic in the past years of production as well as GIP, in parallel with a high diminished unemployment, with a real salary rise and national currency estimation. Thus, for instance, in December 2006, net average salary reached and surpassed for the first time in the 17 years the purchase power of the salary that existed before prices liberalization, October 1990. Further on, I held forth to analyze the discrepancies between the prizes rises existing at the main products subgroups, at the end of the observed period. Thus, if the CPI in December 2006 shown an average rise of prizes on a total of 2.864 times, as against October 1990, on the three main subgroups of goods the rises have been different: food products prizes rose with 2,210 times being situated under the average with 23% while non-foods medium prizes rose in the some span with 3.029 times (+6%), and the rendering services tariffs rose with 5.029 times, what represents a rise of 1,76 times higher than the total CPI.


Fig. 2 Consumer Prices Indexes' evolution (C.P.I.) from Romania from their liberalization up to the end of 2006 (12.1996/10.1990) (n quotients) 6000 5000 4000 3000 2000 1000 0 Food Non-food Services 2210 Total C.P.I. 2864 times 3029 5027

In the framework of food goods group, the highest rises were facing loaf products, of 5.428 times (2,5 times as against total CPI and respectively 1,9 times as against the group average). These were close followed by fish and fish products group with 4,067 times (1,8 times as against the total CPI and 1,4 times more than subgroup average), by milk and diary products with raises of prizes of 3.053 times, flour with 2,829 times, maize flour with 2,669 times etc. main subgroups dynamics was calculated and may be observed in the following graphic, the rises being ordered decreasingly. The lowest prizes rises have been met with cocoa and coffee, products that are not subscribed to main necessities. At the some category is subscribed the alcoholic drinks group, where the prizes rise was with 39% under the group average. In the framework of non-food goods group, the highest rises have been registered at electric energy, gas and central heating, damaging in a great extent incomes and spending populations budget, also given by the important weight in total consumption of these expenses, (9,64% in 2004 for instance). These increased with 6,685 times in the analyzed period what means an increase of 2,2 times higher than the total CPI and a 2,3 times more than group average. The lowest rises, as the following graphic presents, have been registered at the clothing, haberdashery, mercery, passementrie trimmings, these rise being with -43% as against the group average. In the framework of rendering services group, the highest rises were registered at water, sewrage, sanitation, services that populations households incurre compulsory, being necessary for living and occupying also an important weight in their expenses (2,34% in 2004). These prizes rose with almost 2,8 times more than the total CPI and with 4,9 more than groups services average. With the some important rises hotels units accommodation costs have been finalized under the conditions that the effort sustained for the accommodation qualitatively increase was not felt at the some level. The lowest rises at services has been observed at making and repairing clothing and footwear group, services required less and less in the latest years due to confections and footwears cheap and low quality that exist on the importing market.


Fig. 3 Consumer Prices Indexes' evolution (C.P.I.) from Romania from their liberalization up to the end of 2006 (12.1996/10.1990) for food goods

Cocoa and coffee Vegetables and tinned vegetables Fruits and tinned fruits Edible oil, bacon, fats Alcoholic beverages Bread Sugar, confectioneries and honey Other food goods Bakery specialties Meat, tinned meat and meat products Maize flour Eggs Flour Milk and diary products Fish and tinned fish Loaf bread 0

831 1275 1541 1705 1744 2065 2279 2325 2619 2632 2669 2824 2829 3053 4067 5428

C.P.I. Food goods 2210 times

1000 2000 3000 4000 5000 6000 CPI quotient

Fig. 4 Consumer Prices Indexes' evolution (C.P.I.) from Romania from their liberalization up to the end of 2006 (12.1996/10.1990) for non-food goods

Clothing, haberdashery,mercery, passe mentrie trimmings Cultural and sports products Hygiene, cosmetics and medical articles Household appliances, furniture Chemicals Footwear Fuels Tobacco, cigarettes Other non-food goods Electric energy, gas, and central heating

1549 C.P.I Non-food goods 1626 3029 times 1814 1881 2054 2161 2903 3527 3528 6685
0 1000 2000 3000 4000 5000 6000 7000 8000

CPI quotient


Fig. 5 Consumer Prices Indexes' evolution (C.P.I.) from Romania from their liberalization up to the end of 2006 (12.1996/10.1990) for services

Making and repairing clothing and footwear Motor and electronic repairs and photo works Interurban transport Restaurants, cafes, canteens Cinemas, theatres, museums, expenditures Hygiene and cosmetics Medical care Mail and telecommunications Urban transport Other services Payment of accommodation in hotel units Water sewerage, sanitation

1878 2911 3569 3692 3712 3928 4193 4412 5835

C.P.I. services 5027 times

11893 13841 14024

2000 4000 6000 8000 10000 12000 14000 16000

CPI quotient

Data sources: own calculation realized according to Prices Statistical Bulletin N.I.S., collection As it could be observed from the last three graphics presented, behind the three main groups CPI important differences are hiding, differences that reach even up to 7 times inequalities of the registered dynamics. It would be important that the main prizes rises to become felt at the products and services that are placed on a lower importance in population consume, aspect not reached yet. As it was shown so far, CPI is one of the fundamental macroeconomics indicators, its dimension reflecting at the end economys performance and not on the last position, populations living standards. Because of the importance that inflation reducing has and also its maintenance at a lower level as possible, aniiflationist measures have to constitute a permanent objective of all governments that rule the country for a certain period, representing finally an indicator that shows the performance degree of that government.

Selective bibliography:
1. 2. 3. Harja E. Statistics Applied to Economy, MatrixRom, Bucharest, 2005; ugui A. - "Inflation Concepts, Theories and Economical Policies, Economic Publish house , Bucharest, 1979; *** Prices Statistical Bulletin, National Institute Statistics, numbers: 12 during 1994 2006 period;