Inflation dynamics in central and eastern European countries
AbstractEconomic and Monetary Union (EMU) raises important questions about policy context and design within member states. As EMU membership rises, so it embraces an increasingly diverse range of countries notwithstanding, the qualifying convergence criteria. Given the importance of convergent inflation to the sustainability of EMU with a common monetary policy, understanding the dynamics of inflation is of particular policy importance. This study uses fractional integration methods to analyse inflation dynamics in 12 Central and Eastern European countries. We find evidence of mean-reversion in only seven countries, with different speeds of reversion across countries. Furthermore, employing a recently developed time-series approach, we uncover the existence of multiple statistically distinct I(0)/I(1) regime states in almost all the countries. This raises the possibility that, as and when these countries join EMU, ECB monetary policy aimed at euro wide price stability could potentially transmit quite differently through these economies, resulting in heterogeneous and diverging inflation outcomes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Nottingham Trent University, Nottingham Business School, Economics Division in its series Working Papers with number 2012/01.
Date of creation: Mar 2012
Date of revision:
Contact details of provider:
Web page: http://www.ntu.ac.uk/nbs
Inflation; Fractional integration; Multiple changes in persistence.;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Otavio Ribeiro de Medeiros and Vitor Leone, 2012. "Multiple Changes in Persistence vs. Explosive Behaviour: The Dotcom Bubble," Working Papers 2012/02, Nottingham Trent University, Nottingham Business School, Economics Division.
- Zsolt Darvas & Balazs Varga, 2013.
"Inflation persistence in central and eastern European countries,"
IEHAS Discussion Papers
1327, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Zsolt Darvas & Balázs Varga, 2013. "Inflation Persistence in Central and Eastern European Countries," Working Papers 1302, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest, revised Jul 2013.
- Zsolt Darvas & BalÃ¡zs Varga, 2013. "Inflation persistence in Central and Eastern European countries," Working Papers 787, Bruegel.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simeon Coleman).
If references are entirely missing, you can add them using this form.