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Driving Forces of Inflation in New EU Countries (in English)

Author

Listed:
  • Emil STAVREV

    (International Monetary Fund, Washington, DC)

Abstract

Driving forces of inflation in the eight new EU member states from Central and Eastern Europe are analyzed using the generalized dynamic-factor model (GDFM) developed by Forni et al. the impact of various macroeconomic variables on inflation is estimated by regressing the GDFM idiosyncratic component on these variables; the importance of second-round and indirect effects from energy shocks is assessed using a bivariate VAR. The author´s results suggest that, first, a significant part of inflation in the new members is driven by common factors, and, second, common component inflation is a better estimator of underlying inflation than a core inflation measure (i.e., headline inflation, excluding energy, food, alcohol, and tobacco).

Suggested Citation

  • Emil STAVREV, 2006. "Driving Forces of Inflation in New EU Countries (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 56(5-6), pages 246-257, May.
    • Handle: RePEc:fau:fauart:v:56:y:2006:i:5-6:p:246-257
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    File URL: http://journal.fsv.cuni.cz/storage/1056_s_246_257.pdf
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    Citations

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    Cited by:

    1. Mr. Emil Stavrev, 2009. "Forces Driving Inflation in the New EU10 Members," IMF Working Papers 2009/051, International Monetary Fund.
    2. Tomislav Globan & Vladimir Arčabić & Petar Sorić, 2016. "Inflation in New EU Member States: A Domestically or Externally Driven Phenomenon?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(1), pages 154-168, January.
    3. Roman Horváth & Kamila Koprnická, 2008. "Inflation Differentials in New EU Member States: Empirical Evidence," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(07-08), pages 318-328, Oktober.
    4. Dejan Zivkov & Slavica Manic & Jasmina Duraskovic & Jelena Kovacevic, 2019. "Bidirectional Nexus between Inflation and Inflation Uncertainty in the Asian Emerging Markets – The GARCH-in-Mean Approach," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(6), pages 580-599, December.

    More about this item

    Keywords

    generalized dynamic-factor model; idiosyncratic components; inflation;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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