Author
Listed:
- Stefan Tanevski
- Marjan Petreski
Abstract
This paper investigates how institutional rigidities shape inflation persistence in transition economies, focusing on labor market institutions and exchange rate regimes. Using a large panel of transition countries over the period 2013-2024, the analysis combines newly constructed indices of wage rigidity and labor protection, derived from AI-assisted coding of legal texts, with de facto measures of exchange rate regime rigidity and standard macroeconomic controls. The empirical strategy adopts a dynamic panel framework in which inflation persistence is conditioned on institutional characteristics through interaction terms, estimated using GMM techniques. Identification follows a cohort-based approach, comparing inflation dynamics across countries with different institutional configurations. To address potential measurement and classification uncertainty in institutional variables, the analysis incorporates a simulation-based sensitivity framework. The results show that inflation persistence varies systematically across institutional settings. Both wage rigidity and exchange rate regime rigidity tend to dampen inflation persistence, indicating that institutional constraints can weaken the transmission of past inflation into current price dynamics. This effect is particularly strong and robust for exchange rate regimes, while the effect of wage rigidity is more sensitive to measurement assumptions. Findings highlight the importance of institutional structures in shaping inflation processes and suggest that nominal rigidities may play a stabilizing role in certain macroeconomic environments.
Suggested Citation
Download full text from publisher
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2605.16862. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
We have no bibliographic references for this item. You can help adding them by using this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .
Please note that corrections may take a couple of weeks to filter through
the various RePEc services.