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Inflation aversion in transition countries: Empirical evidence from the Baltic States

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  • Berlemann, Michael

Abstract

In command economies, inflation is either absent or at least unrelated to supply and demand. However, when the economies in Eastern Europe started transforming into market economies, they suddenly experienced high and volatile inflation rates. Transformation countries are therefore interesting laboratories for studying individual inflation aversion. In this paper we study the level and determinants of individual inflation aversion in the three Baltic countries. Using data from 11 waves of the Eurobarometer survey, we find age, education and the macroeconomic situation to have significant effects on the likelihood to mention inflation among the most important problems facing the country. Moreover, we find the populations of all three Baltic countries to be significantly more inflation averse than the population of the United Kingdom, a western democracy with a long tradition as a market economy. We attribute this finding to the specific experiences of the Baltic populations with inflation.

Suggested Citation

  • Berlemann, Michael, 2014. "Inflation aversion in transition countries: Empirical evidence from the Baltic States," Economic Systems, Elsevier, vol. 38(3), pages 415-432.
    • Handle: RePEc:eee:ecosys:v:38:y:2014:i:3:p:415-432
    DOI: 10.1016/j.ecosys.2014.02.001
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    More about this item

    Keywords

    Inflation; Inflation aversion; Transformation countries; Preferences; Hyperinflation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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