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Inflation dynamics and nominal adjustment in the Baltic States

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  • Masso, Jaan
  • Staehr, Karsten

Abstract

The paper seeks to explain the inflationary dynamics in the Baltic countries since the mid-1990s. While single-equation estimations generally yield poor results, panel data estimations provide statistically and economically satisfactory findings. Our main result is that the observed gradual disinflation can to a large extent be explained by adjustment to international prices. Stringent fixed exchange rate systems have exerted downward pressure on inflation both directly and via expectations of future inflation. Measures of excess capacity in the labour market have no effect on inflation, while industrial output gaps have some explanatory power. Real oil price shocks have an immediate but short-lived impact on inflation.

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Bibliographic Info

Article provided by Elsevier in its journal Research in International Business and Finance.

Volume (Year): 19 (2005)
Issue (Month): 2 (June)
Pages: 281-303

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Handle: RePEc:eee:riibaf:v:19:y:2005:i:2:p:281-303

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Cited by:
  1. Mockaitis, Audra I., 2005. "The race to EU integration: How many and how high are the hurdles?," Research in International Business and Finance, Elsevier, vol. 19(2), pages 195-199, June.
  2. Fumitaka Furuoka, 2007. "Does the “Phillips Curve” Really Exist? New Empirical Evidence from Malaysia," Economics Bulletin, AccessEcon, vol. 5(16), pages 1-14.
  3. Aleksejs Meļihovs & Anna Zasova, 2009. "Assessment of the natural rate of unemployment and capacity utilisation in Latvia," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(2), pages 25-46, December.
  4. Rasmus Kattai, 2005. "EMMA - A Quarterly Model of the Estonian Economy," Bank of Estonia Working Papers 2005-12, Bank of Estonia, revised 12 Dec 2005.
  5. Borek Vasicek, 2009. "Inflation dynamics and the New Keynesian Phillips curve in EU-4," William Davidson Institute Working Papers Series wp971, William Davidson Institute at the University of Michigan.
  6. Ciner, Cetin, 2011. "Commodity prices and inflation: Testing in the frequency domain," Research in International Business and Finance, Elsevier, vol. 25(3), pages 229-237, September.
  7. Karsten Staehr, 2008. "The Maastricht Inflation Criterion and the New EU Members from Central and Eastern Europe," Bank of Estonia Working Papers 2008-04, Bank of Estonia, revised 30 Oct 2008.
  8. Aurelijus Dabušinskas & Dmitry Kulikov, 2007. "New Keynesian Phillips curve for Estonia, Latvia and Lithuania," Bank of Estonia Working Papers 2007-07, Bank of Estonia, revised 26 Aug 2007.
  9. Fumitaka Furuoka & Qaiser Munir & Hanafiah Harvey, 2013. "Does the Phillips curve exist in the Philippines?," Economics Bulletin, AccessEcon, vol. 33(3), pages 2001-2016.
  10. repec:ebl:ecbull:v:5:y:2007:i:16:p:1-14 is not listed on IDEAS

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