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Impact Of Regulated Price Adjustments On Price Variability In A Very Low Inflation Transition Economy: Case Of Armenia

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  • Aghassi Mkrtchyan
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    Abstract

    The impact of macroeconomic management (monetary policy) and administrative price adjustments on price variability in a low inflation economy characterized by relatively frequent administrative price adjustments is examined. Fluctuations of market determined prices, prices of agricultural goods in particular, are linked to the lack of synchronization between administrative price changes and monetary policy. If monetary policy does not account for expected changes in administrative prices, demand in “free” goods markets will shift causing fluctuation of prices for agricultural goods, because the supply of these goods is highly inelastic in Armenia. The findings contribute to a better understanding of agricultural price variability during 1998-2002. The impact of macroeconomic policy and structural adjustments on income distribution and rural poverty incidence are also examined. This research has immediate policy implications since Armenia will undergo major upward price adjustments for goods and services with regulated prices, which may have a negative impact on income distribution if aggregate demand management is unchanged.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp731.pdf
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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 wp731.

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    Length: pages
    Date of creation: 01 Nov 2004
    Date of revision:
    Handle: RePEc:wdi:papers:2004-731

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    Keywords: Inflation; price variability; regulated prices;

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    1. Henisz, Witold J. & Zelner, Bennet A., 2006. "Interest Groups, Veto Points, and Electricity Infrastructure Deployment," International Organization, Cambridge University Press, vol. 60(01), pages 263-286, January.
    2. Witold J. Henisz & Edward D. Mansfield, 2004. "Votes and Vetoes: The Political Determinants of Commercial Openness," William Davidson Institute Working Papers Series 2004-712, William Davidson Institute at the University of Michigan.
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