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Inflation Determinants in Paraguay; Cost Push versus Demand Pull Factors

Author

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  • Brieuc Monfort
  • Santiago Peña

Abstract

This article uses two analytical methodologies to understand the dynamics of inflation in Paraguay, the mark-up theory of inflation and the monetary theory of inflation. We also study the impact of different monetary aggregates. The results suggest that monetary factors, in particular currency in circulation, play a major role in determining long-run inflation, while foreign prices, in particular from Brazil, or some food products have a large impact on the short-term dynamics of inflation. Wage indexation may also contribute to locking up price increases.

Suggested Citation

  • Brieuc Monfort & Santiago Peña, 2008. "Inflation Determinants in Paraguay; Cost Push versus Demand Pull Factors," IMF Working Papers 08/270, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/270
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    References listed on IDEAS

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    1. Mick Silver, 2006. "Core Inflation Measures and Statistical Issues in Choosing Among Them," IMF Working Papers 06/97, International Monetary Fund.
    2. Toshitaka Sekine, 2001. "Modeling and Forecasting Inflation in Japan," IMF Working Papers 01/82, International Monetary Fund.
    3. Robalo Marques, Carlos & Duarte Neves, Pedro & Morais Sarmento, Luis, 2003. "Evaluating core inflation indicators," Economic Modelling, Elsevier, vol. 20(4), pages 765-775, July.
    4. Armine Khachatryan & David A. Grigorian & Grigor Sargsyan, 2004. "Exchange Rate, Money, and Wages; What is Driving Prices in Armenia?," IMF Working Papers 04/229, International Monetary Fund.
    5. Bogdan Lissovolik, 2003. "Determinants of Inflation in a Transition Economy; The Case of Ukraine," IMF Working Papers 03/126, International Monetary Fund.
    6. de Brouwer, Gordon & Ericsson, Neil R, 1998. "Modeling Inflation in Australia," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 433-449, October.
    7. Oomes, Nienke & Ohnsorge, Franziska, 2005. "Money demand and inflation in dollarized economies: The case of Russia," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 462-483, September.
    8. Stephen G. Cecchetti, 1997. "Measuring short-run inflation for central bankers," Review, Federal Reserve Bank of St. Louis, issue May, pages 143-155.
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    Cited by:

    1. Mehak Moazam & M. Ali Kemal, 2016. "Inflation in Pakistan: Money or Oil Prices," PIDE-Working Papers 2016:144, Pakistan Institute of Development Economics.
    2. Mehak Moazam & M. Ali Kemal, 2016. "Inflation in Pakistan: Money or Oil Prices," Working Papers id:11507, eSocialSciences.

    More about this item

    Keywords

    Demand for money; Money demand; Inflation; Price increases; Paraguay; Spillovers; Wage indexation; Core inflation; mark-up; pass-through.; monetary aggregate; monetary aggregates; money supply; pass-through;

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