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What triggers inflation in emerging market economics?

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Listed author(s):
  • Domac, Ilker
  • Yucel, Eray M.

Abstract

Emerging market economies (EMEs) have experienced a noticeable decline in inflation since the mid-1990s. Whether this stable price environment in EMEs is likely to endure and what kind of policies need to be followed to ensure price stability, however, still continue to be questions of considerable policy relevance. The authors investigate the factors associated with the start of 24 inflation episodes in 15 EMEs between 1980 and 2001. They use pooled probit analysis to estimate the contribution of the key factors to inflation starts. Their empirical results suggest that increases in the output gap, agricultural shocks, and expansionary fiscal policy raise the probability of inflation starts in EMEs. Their findings also indicate that a more democratic environment and an increase in capital flows relative to GDP reduce the probability of inflation starts.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3376.

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Date of creation: 01 Aug 2004
Handle: RePEc:wbk:wbrwps:3376
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Keywords: Environmental Economics&Policies; Markets and Market Access; Banks&Banking Reform; Economic Theory&Research; Settlement of Investment Disputes; Environmental Economics&Policies; Economic Theory&Research; Markets and Market Access; Access to Markets; Financial Intermediation;

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Cited by:

  1. Lin, Hsin-Yi & Chu, Hao-Pang, 2013. "Are fiscal deficits inflationary?," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 214-233.
  2. Granville, Brigitte & Mallick, Sushanta, 2010. "Monetary Policy in Russia: Identifying exchange rate shocks," Economic Modelling, Elsevier, vol. 27(1), pages 432-444, January.
  3. Pami Dua & Upasna Gaur, 2010. "Determination of inflation in an open economy Phillips curve framework: the case of developed and developing Asian countries," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 3(1), pages 33-51.
  4. Pradhan, Rudra P. & Arvin, Mak B. & Bahmani, Sahar, 2015. "Causal nexus between economic growth, inflation, and stock market development: The case of OECD countries," Global Finance Journal, Elsevier, vol. 27(C), pages 98-111.
  5. Ugur Ciplak & Eray M. Yucel, 2004. "Trade Protection Measures, Agricultural and Food Prices," Working Papers 0401, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  6. Jalil, Abdul & Tariq, Rabbia & Bibi, Nazia, 2014. "Fiscal deficit and inflation: New evidences from Pakistan using a bounds testing approach," Economic Modelling, Elsevier, vol. 37(C), pages 120-126.
  7. Akcay, Belgin & Yucel, Eray, 2014. "Unveiling the House Price Movements and Financial Development," MPRA Paper 59377, University Library of Munich, Germany, revised 19 Oct 2014.
  8. Pavle Petrovic & Zorica Mladenovic & Aleksandra Nojkovic, 2011. "Inflation Triggers in Transition Economies: Their Evolution and Specific Features," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(5), pages 101-124, September.

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