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Selecting inflation indicators under an inflation targeting regime: evidence from the MCL method

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  • Koskinen, Juha-Pekka
  • Koivu, Tuuli
  • Chowdhury, Abdur

Abstract

This paper seeks to fill a gap in the literature by analyzing inflation in Poland, one of only two transition economies that have adopted a strict inflation-targeting policy.The paper also introduces a new method for selecting inflation indicators. Consistent with the earlier literature, empirical results find a strong link between the producer price index and consumer price index in Poland.This shows the importance of the manufacturing sector in determining the price level in the country.Overall, wages, broad money supply and the exchange rate are good indicators of inflation.

Suggested Citation

  • Koskinen, Juha-Pekka & Koivu, Tuuli & Chowdhury, Abdur, 2004. "Selecting inflation indicators under an inflation targeting regime: evidence from the MCL method," BOFIT Discussion Papers 16/2004, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2004_016
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    References listed on IDEAS

    as
    1. Nivorozhkin, Eugene, 2003. "The dynamics of capital structure in transition economies," BOFIT Discussion Papers 2/2003, Bank of Finland, Institute for Economies in Transition.
    2. Laurence M. Ball & Niamh Sheridan, 2004. "Does Inflation Targeting Matter?," NBER Chapters, in: The Inflation-Targeting Debate, pages 249-276, National Bureau of Economic Research, Inc.
    3. Welfe, Aleksander, 2000. "Modeling inflation in Poland," Economic Modelling, Elsevier, vol. 17(3), pages 375-385, August.
    4. Svensson, Lars E. O., 2000. "Open-economy inflation targeting," Journal of International Economics, Elsevier, vol. 50(1), pages 155-183, February.
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    6. Karsten Staehr, 2005. "Reforms and Economic Growth in Transition Economies: Complementarity, Sequencing and Speed," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(2), pages 177-202, December.
    7. Kim, Byung-Yeon, 2001. "Determinants of inflation in Poland: A structural cointegration approach," BOFIT Discussion Papers 16/2001, Bank of Finland Institute for Emerging Economies (BOFIT).
    8. Mishkin, Frederic S., 1998. "International Experiences With Different Monetary Policy Regimes," Seminar Papers 648, Stockholm University, Institute for International Economic Studies.
    9. repec:zbw:bofitp:2001_016 is not listed on IDEAS
    10. Frederic S. Mishkin, 2002. "Does inflation targeting matter? - commentary," Review, Federal Reserve Bank of St. Louis, vol. 84(Jul), pages 149-154.
    11. repec:zbw:bofitp:2003_001 is not listed on IDEAS
    12. R. Golinelli & R. Orsi, 2001. "Hungary and Poland," Working Papers 424, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. Gottschalk, Jan & Moore, David, 1999. "Implementing inflation targeting regimes: The case of Poland," Kiel Working Papers 956, Kiel Institute for the World Economy (IfW Kiel).
    14. 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.
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    Keywords

    inflation; Poland; MCL method;
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