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Inflation and the Structure of Economic and Political Systems

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  • Elbahnasawy, Nasr G.
  • Ellis, Michael A.

Abstract

Theories of inflation emphasize different aspects of economic and political structure as the root causes of inflation. We reexamine these root causes, including two aspects of economic structure that have received no or little analysis in this context: the natural resource sector and the shadow economy. Using a large panel data set and a more extensive set of explanatory variables, our main findings are that higher inflation is associated with an increase in the size of the natural resource sector, the shadow economy, greater political instability, and less democratic political systems. These results also hold for subsamples of developing countries. The consistency in finding that the natural resource sector and shadow economy are determinants of inflation suggest that these aspects of economic structure should receive increased attention in assessing the causes of inflation, along with the usual focus on political structure.

Suggested Citation

  • Elbahnasawy, Nasr G. & Ellis, Michael A., 2022. "Inflation and the Structure of Economic and Political Systems," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 59-74.
    • Handle: RePEc:eee:streco:v:60:y:2022:i:c:p:59-74
    DOI: 10.1016/j.strueco.2021.11.006
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    3. Aleksy Kwilinski & Nataliya Dalevska & Vyacheslav V. Dementyev, 2022. "Metatheoretical Issues of the Evolution of the International Political Economy," JRFM, MDPI, vol. 15(3), pages 1-14, March.

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    More about this item

    Keywords

    Inflation; Natural resources; Shadow economy; Political instability; Economic structure; Political structure;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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