Modeling Inflation in Croatia
AbstractThis paper constructs a quarterly inflation model for Croatia, using the general-to-specific approach to model inflation dynamics. A two-step procedure is followed. First, we conduct a long-run sectoral analysis of inflation sources, yielding long-run determinants of inflation: markup, excess money, nominal effective exchange rate, and the output gap. Second, we estimate an equilibrium error correction model of inflation, deploying, among other variables of interest, the long-run solutions derived in the first step. The derived model of inflation suggests that inflation inertia and Croatian trading partners' inflation are most important for explaining the short-run behavior of inflation. Apart from these two variables, markup, excess money, output gap, nominal exchange rate, and broad money also contribute to inflation changes in the short run.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.
Volume (Year): 45 (2009)
Issue (Month): 6 (November)
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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024
cointegration; Croatia; general-to-specific; inflation modeling;
Other versions of this item:
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Billmeier, Andreas & Bonato, Leo, 2004.
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Elsevier, vol. 32(3), pages 426-444, September.
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- Valerija Botric, 2012. "NAIRU estimates for Croatia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 30(1), pages 163-180.
- Fakhri, Hasanov & Khudayar, Hasanli, 2011. "Why had the Money Market Approach been irrelevant in explaining inflation in Azerbaijan during the rapid economic growth period?," MPRA Paper 29559, University Library of Munich, Germany.
- Boromisa, Ana-Maria & Knezović, Sandro, 2008. "Croatia: Integration Perspectives and Synergic Effects of European Transformation in the Countries Targeted by EU Enlargement and Neighbourhood Policies Economy," MPRA Paper 23971, University Library of Munich, Germany.
- Zapodeanu Daniela & Gavris Natalia & Leac Dafina Roxana & Teudan Ana - Maria, 2011. "A Liniar Model Of Analyzing Inflation In Romania, Bulgaria, Turkey And Croatia," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 445-451, December.
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