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The End of Moderate Inflation in Three Transition Economies?

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  • Josef C. Brada
  • Ali M. Kutan

Abstract

This paper examines the moderation of inflation in three transition economies, the Czech Republic, Hungary and Poland at the end of the 1990s. We argue that the institutions for the conduct of monetary policy in these countries were relatively weak and that monetary policy was unsupported by fiscal policy and hampered by multiple objectives. Using a VAR model of inflation, we show that, under a variety of assumptions, foreign prices and the persistence of inflation were the key determinants of inflation in these countries. From this finding we conclude that the moderation of inflation in the Czech Republic, Hungary and Poland was due largely to the decline in import prices from 1997 on, and thus it is likely be a temporary phenomenon.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 433.

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Length: pages
Date of creation: 01 Jan 2002
Date of revision:
Handle: RePEc:wdi:papers:2001-433

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Keywords: monetary and fiscal policy; transition economies; moderate inflation and inflation targeting;

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References

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Citations

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Cited by:
  1. Dibooglu, Selahattin & Kutan, Ali M., 2000. "Sources of real exchange rate fluctuations in transition economies: The case of Ploand and Hungary," ZEI Working Papers B 14-2000, ZEI - Center for European Integration Studies, University of Bonn.
  2. Kim, Byung-Yeon, 2001. "Determinants of Inflation in Poland: A Structural Cointegration Approach," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 16/2001, Bank of Finland, Institute for Economies in Transition.
  3. Dibooglu, Selahattin & Kutan, Ali M., 2001. "Sources of inflation and output fluctuations in Poland and Hungary: Implications for full membership in the European Union," ZEI Working Papers B 16-2001, ZEI - Center for European Integration Studies, University of Bonn.
  4. Boriss Siliverstovs & Olena Bilan, 2005. "Modelling Inflation Dynamics in Transition Economies: The Case of Ukraine," Discussion Papers of DIW Berlin 476, DIW Berlin, German Institute for Economic Research.
  5. Ekaterina VOSTROKNUTOVA, 2003. "Polish Stabilization: What Can We Learn From the I (2) Cointegration Analysis," Economics Working Papers, European University Institute ECO2003/06, European University Institute.
  6. Payne, James E., 2002. "Inflationary dynamics of a transition economy: the Croatian experience," Journal of Policy Modeling, Elsevier, Elsevier, vol. 24(3), pages 219-230, June.
  7. Byung-Yeon Kim & Jukka Pirttilä & Jouko Rautava, 2002. "Money, Barter and Inflation in Russia," Macroeconomics, EconWPA 0209009, EconWPA.
  8. Wachtel, Paul & Korhonen, Iikka, 2004. "Observations on disinflation in transition economies," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 5/2004, Bank of Finland, Institute for Economies in Transition.
  9. Mikek, Peter, 2008. "Alternative monetary policies and fiscal regime in new EU members," Economic Systems, Elsevier, Elsevier, vol. 32(4), pages 335-353, December.
  10. Roberto Golinelli & Riccardo Rovelli, 2002. "Monetary Policy Transmission, Interest Rate Rules and Inflation Targeting in Three Transition Countries," Eastward Enlargement of the Euro-zone Working Papers, Free University Berlin, Jean Monnet Centre of Excellence wp10, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Aug 2002.
  11. Peter Backé & Jarko Fidrmuc & Thomas Reininger & Franz Schardax, 2002. "Price Dynamics in Central and Eastern European EU Accession," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 61, Oesterreichische Nationalbank (Austrian Central Bank).
  12. Dibooglu, Sel & Kutan, Ali M., 2005. "Sources of inflation and output movements in Poland and Hungary: Policy implications for accession to the economic and monetary union," Journal of Macroeconomics, Elsevier, Elsevier, vol. 27(1), pages 107-131, March.
  13. repec:onb:oenbwp:y::i:61:b:1 is not listed on IDEAS
  14. Komulainen, Tuomas & Pirttila, Jukka, 2002. " Fiscal Explanations for Inflation: Any Evidence from Transition Economies?," Economic Change and Restructuring, Springer, Springer, vol. 35(3), pages 293-316.
  15. Dvorsky, Sandra, 2000. "Measuring Central Bank Independence in Selected Transition Countries and the Disinflation Process," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 13/2000, Bank of Finland, Institute for Economies in Transition.

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