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What Triggers Inflation in Emerging Market Economies?

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Author Info

  • Ilker Domaç

    ()

  • Eray M. Yücel

Abstract

Emerging market economies (EMEs) have experienced a noticeable decline in inflation since the mid-1990s. Whether this stable price environment in EMEs is likely to endure and what kind of policies need to be followed to ensure price stability, however, still continue to be questions of considerable policy relevance. The authors investigate the factors associated with the start of 24 inflation episodes in 15 EMEs between 1980 and 2001. They use pooled probit analysis to estimate the contribution of the key factors to inflation starts. Their empirical results suggest that increases in the output gap, agricultural shocks, and expansionary fiscal policy raise the probability of inflation starts in EMEs. Their findings also indicate that a more democratic environment and an increase in capital flows relative to GDP reduce the probability of inflation starts.

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Bibliographic Info

Article provided by Springer in its journal Review of World Economics.

Volume (Year): 141 (2005)
Issue (Month): 1 (April)
Pages: 141-164
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Handle: RePEc:spr:weltar:v:141:y:2005:i:1:p:141-164

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Related research

Keywords: Inflation starts; emerging market economies; price level stability; probit analysis;

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References

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  17. Corrinne Ho & Robert N. McCauley, 2003. "Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies," BIS Working Papers 130, Bank for International Settlements.
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Citations

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Cited by:
  1. Ugur Ciplak & Eray M. Yucel, 2004. "Trade Protection Measures, Agricultural and Food Prices," Working Papers 0401, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  2. Pami Dua & Gaur Upasna, 2009. "Determination of Inflation in an Open Economy Phillips Curve Framework: The Case of Developed and Developing Asian Countries," Working Papers id:1973, eSocialSciences.

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