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Why had the Money Market Approach been irrelevant in explaining inflation in Azerbaijan during the rapid economic growth period?

  • Fakhri, Hasanov
  • Khudayar, Hasanli

The study examines whether inflation process can be explained within the framework of the Money Market Approach in the third stage of economic development of Azerbaijan economy covering 2004-2008. By employing dynamic modeling study concludes that the Money Market Approach has not been relevant for explaining Azerbaijani inflation. Because Azerbaijan, a resource rich small open economy in transition processes, has some stylized facts which are important to take into account in the analysis of the inflation. Since the Money Market Approach seems irrelevant one, the paper puts forward application of other alternative explanations for Azerbaijani inflation in the future. In this regard analyzing inflation in the context of resource dependence seems one of the relevant approaches due to high price increases mainly sourced from oil revenues.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29559.

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Date of creation: Feb 2011
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Handle: RePEc:pra:mprapa:29559
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  1. Hasanov, Fakhri, 2010. "The impact of real oil price on real effective exchange rate: The case of Azerbaijan," MPRA Paper 33493, University Library of Munich, Germany.
  2. Maruška Vizek & Tanja Broz, 2007. "Modelling Inflation in Croatia," Working Papers 0703, The Institute of Economics, Zagreb.
  3. Valery Chernookiy, 2005. "Model Of Inflation Processes In The Republic Of Belarus," Macroeconomics 0505002, EconWPA.
  4. Melisso Boschi & Alessandro Girardi, 2007. "Euro area inflation: long-run determinants and short-run dynamics," Applied Financial Economics, Taylor & Francis Journals, vol. 17(1), pages 9-24.
  5. Bogdan Lissovolik, 2003. "Determinants of Inflation in a Transition Economy; The Case of Ukraine," IMF Working Papers 03/126, International Monetary Fund.
  6. Clark, Peter B. & MacDonald, Ronald, 2004. "Filtering the BEER: A permanent and transitory decomposition," Global Finance Journal, Elsevier, vol. 15(1), pages 29-56.
  7. de Brouwer, Gordon & Ericsson, Neil R, 1998. "Modeling Inflation in Australia," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 433-49, October.
  8. Louis Kuijs, 2002. "Monetary Policy Transmission Mechanisms and Inflation in Slovakia," IMF Working Papers 02/80, International Monetary Fund.
  9. Kim, Byung-Yeon, 2001. "Determinants of Inflation in Poland: A Structural Cointegration Approach," BOFIT Discussion Papers 16/2001, Bank of Finland, Institute for Economies in Transition.
  10. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  11. Roberto Golinelli & Renzo Orsi, 2002. "Modelling Inflation in EU Accession Countries: The Case of the Czech Republic, Hungary and Poland," Eastward Enlargement of the Euro-zone Working Papers wp09, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Aug 2002.
  12. Hasanov Fakhri, 2011. "Dutch Disease and Azerbaijan Economy," EERC Working Paper Series 11/03e, EERC Research Network, Russia and CIS.
  13. Shuang Ding & Omar Al Shehabi, 2008. "Estimating Equilibrium Exchange Rates for Armenia and Georgia," IMF Working Papers 08/110, International Monetary Fund.
  14. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  15. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  16. Balázs Égert, 2009. "Dutch Disease in Former Soviet Union: Witch-Hunting," CASE Network Studies and Analyses 0380, CASE-Center for Social and Economic Research.
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