A Brief Inquiry into the Evolution of Inflation during the Fall of Communism, Global Financial Crisis (2008-2009) and COVID-19 Pandemic

Our research shows that major economic events (or shocks) do influence inflation. The positive correlation coefficients show that each of these shocks had repercussions on the inflation in the countries analyzed. This can be explained by the fact that economies, especially in the last two decades, became more interconnected, thus increasing the risk of spillovers. At the country level, differences in the levels of inflation can be explained, most likely, by the specific fundamentals of each economy or, perhaps, each region. The results may be biased by the rather specific circumstances that prevailed after the global financial crisis i.e. unconventional monetary policy measures and public support during the COVID-19. The last two events analyzed show that authorities can support aggregate demand, but if this stimulus is not paired with the necessary reforms to support the aggregate supply as well, then economic growth and resilience, together with a low and stable inflation, cannot be achieved.