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What explains persistent inflation differentials across transition economies?


  • Felix Hammermann
  • Mark Flanagan


We document that a persistent inflation differential has opened across different groups of transition economies since 2001, with the CIS-West seeing particularly high outcomes. We consider a range of non-monetary explanations discussed in the literature (economic structure, policy and institutions), and controlling for economic shocks, we find a role for political stability, as emphasized in previous cross-country work. However, our results suggest that lagging internal and external liberalization have been the key disincentives to disinflation. Consequently, lower inflation targets would not be credible in the absence of stronger structural and monetary policy frameworks. Copyright (c) 2009 International Monetary Fund. Journal compilation (c) 2009 The European Bank for Reconstruction and Development.

Suggested Citation

  • Felix Hammermann & Mark Flanagan, 2009. "What explains persistent inflation differentials across transition economies?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(2), pages 297-328, April.
  • Handle: RePEc:bla:etrans:v:17:y:2009:i:2:p:297-328

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    References listed on IDEAS

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    Cited by:

    1. Égert, Balázs, 2011. "Catching-up and inflation in Europe: Balassa-Samuelson, Engel's Law and other culprits," Economic Systems, Elsevier, vol. 35(2), pages 208-229, June.
    2. Tomislav Globan & Vladimir Arčabić & Petar Sorić, 2016. "Inflation in New EU Member States: A Domestically or Externally Driven Phenomenon?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(1), pages 154-168, January.
    3. Tomislav Globan & Vladimir Arčabić & Petar Sorić, 2016. "Inflation in New EU Member States: A Domestically or Externally Driven Phenomenon?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(1), pages 154-168, January.

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