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Understanding price developments and consumer price indices in south-eastern Europe

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  • Sabine Herrmann
  • Eva Katalin Polgar

Abstract

The primary goal of monetary policy in most economies of the world is to achieve and maintain price stability. This paper evaluates price developments and consumer price indices in south-eastern European countries, i.e. countries that have either recently joined the EU or are candidate or potential candidate countries. It is motivated by the fact that, in transition countries, inflation has generally been higher and more volatile than in advanced economies. The analysis reveals that the subindex housing/energy appears to be the main driving force behind overall inflation in the region. In most of the countries under review, administered prices prove to be an important factor in consumer price developments, with their weights increasing over time. Inflation volatility in south-eastern Europe is significantly higher than in the euro area. While this is partly due to a higher level of inflation, it also reflects a more pronounced share for the most volatile sub-indices as well as the marked impact of administered prices on the overall price index, a phenomenon which has also been seen in the central and eastern European countries. While in most south-eastern European countries no HICP has been calculated yet, there is little evidence suggesting that the future use of the HICP will result in a systematic change in inflation patterns in the respective countries. However, as deviations have been observed in a few countries for certain periods, without further information on the structure of the respective national CPI and the HICP such differences cannot be fully excluded. JEL Classification: E21, O52, O57, P22.

Suggested Citation

  • Sabine Herrmann & Eva Katalin Polgar, 2007. "Understanding price developments and consumer price indices in south-eastern Europe," Occasional Paper Series 57, European Central Bank.
  • Handle: RePEc:ecb:ecbops:20070057
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    Cited by:

    1. di Mauro, Filippo & Kaufmann, Robert K. & Karadeloglou, Pavlos, 2008. "Will oil prices decline over the long run?," Occasional Paper Series 98, European Central Bank.
    2. Mehl, Arnaud & Bussière, Matthieu, 2008. "China's and India's roles in global trade and finance: twin titans for the new millennium?," Occasional Paper Series 80, European Central Bank.
    3. Irina Bunda, 2007. "The Changing Role of the Exchange Rate in a Globalised Economy," Post-Print halshs-00372820, HAL.
    4. Gómez-Salvador, Ramón & Leiner-Killinger, Nadine, 2008. "An analysis of youth unemployment in the euro area," Occasional Paper Series 89, European Central Bank.
    5. Sturm, Michael & Adolf, Petra & Peschel, Dominik & Stráský, Jan, 2008. "The Gulf Cooperation Council countries: economic structures, recent developments and role in the global economy," Occasional Paper Series 92, European Central Bank.
    6. Van Nieuwenhuyze, Christophe & Ruth, Karsten & Rua, António & Jelonek, Piotr & Jakaitiene, Audrone & Den Reijer, Ard & Cristadoro, Riccardo & Rünstler, Gerhard & Benk, Szilard & Barhoumi, Karim, 2008. "Short-term forecasting of GDP using large monthly datasets: a pseudo real-time forecast evaluation exercise," Occasional Paper Series 84, European Central Bank.
    7. Mayerlen, Frank & Sola, Pierre & Be Duc, Louis, 2008. "The monetary presentation of the euro area balance of payments," Occasional Paper Series 96, European Central Bank.
    8. Winkler, Adalbert & Polański, Zbigniew, 2008. "Russia, EU enlargement and the euro," Occasional Paper Series 93, European Central Bank.
    9. Poloni, Paolo & Agresti, Anna Maria & Baudino, Patrizia, 2008. "The ECB and IMF indicators for the macro-prudential analysis of the banking sector: a comparison of the two approaches," Occasional Paper Series 99, European Central Bank.
    10. Blattner, Tobias Sebastian & Catenaro, Marco & Ehrmann, Michael & Strauch, Rolf & Turunen, Jarkko, 2008. "The predictability of monetary policy," Occasional Paper Series 83, European Central Bank.
    11. Moutot, Philippe & Jung, Alexander & Mongelli, Francesco Paolo, 2008. "The working of the eurosystem: monetary policy preparations and decision-making - selected issues," Occasional Paper Series 79, European Central Bank.
    12. Klaus Masuch & Ramon Gómez-Salvador & Nadine Leiner-Killinger & Rolf Strauch & Jarkko Turunen & Melanie Ward-Warmedinger & Jan De Mulder & Harald Stahl & Yvonne McCarthy & Daphne Nicolitsas & Aitor La, 2008. "Labour supply and employment in the euro area countries - developments and challenges," Occasional Paper Series 87, European Central Bank.
    13. Strauch, Rolf & Gómez-Salvador, Ramón & Ward-Warmedinger, Melanie & Turunen, Jarkko & Leiner-Killinger, Nadine & Masuch, Klaus, 2008. "Labour supply and employment in the euro area countries: developments and challenges," Occasional Paper Series 87, European Central Bank.
    14. Filippo Di Mauro & Katrin Forster, "undated". "Globalisation and the competitiveness of the Euro area," Working Papers 5, Department of the Treasury, Ministry of the Economy and of Finance.
    15. Cappiello, Lorenzo & Ferrucci, Gianluigi, 2008. "The sustainability of China's exchange rate policy and capital account liberalisation," Occasional Paper Series 82, European Central Bank.
    16. Bracke, Thierry & Bussière, Matthieu & Fidora, Michael & Straub, Roland, 2008. "A framework for assessing global imbalances," Occasional Paper Series 78, European Central Bank.
    17. Fidora, Michael & Beck, Roland, 2008. "The impact of sovereign wealth funds on global financial markets," Occasional Paper Series 91, European Central Bank.
    18. Morgese Borys, Magdalena & Polgár, Éva Katalin & Zlate, Andrei, 2008. "Real convergence and the determinants of growth in EU candidate and potential candidate countries: a panel data approach," Occasional Paper Series 86, European Central Bank.
    19. Winkler, Adalbert & Schokker, Hubert & Cocozza, Emidio & Herzberg, Valerie & Móré, Csaba & de Lannoy, Anthony & Gardó, Sándor & Chmielewski, Tomasz & Polgár, Éva Katalin & Habib, Maurizio Michael & Br, 2008. "Financial stability challenges in candidate countries managing the transition to deeper and more market-oriented financial systems," Occasional Paper Series 95, European Central Bank.

    More about this item

    Keywords

    South-eastern Europe; inflation developments; inflation volatility; consumer price indices; HICP; administered prices.;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P22 - Economic Systems - - Socialist Systems and Transition Economies - - - Prices

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