Determinants of Inflation in a Transition Economy: the Case of Ukraine

 
Author/Editor: Lissovolik, Bogdan
 
Publication Date: June 01, 2003
 
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Summary: This paper examines determinants of inflation in Ukraine during 1993-2002 in a cointegrating framework. Two basic theoretical models-a markup and a money market model-are tested. While broad money is cointegrated with the CPI for the whole sample and for early subsamples, the cointegration ceases to be statistically significant between 1996-2002, in part because of strong remonetization. The mark-up model offers a more consistent and well-fitting overall framework for 1996-2002 data, pointing inter alia to a greater role of administered prices in the CPI within a fairly mainstream inflation process. The "long-term" monetary transmission mechanism operates through the exchange rate and wages, but broad money clearly enters short-term inflation determinants. Prudent macroeconomic policies, grain harvests, and administrative decisions explain the sharp decline of inflation over 2000-2002.
 
Series: Working Paper No. 03/126
Subject(s): Inflation | Ukraine | Transition economies | Economic models

Author's Keyword(s): Inflation | transition | Ukraine | cointegration
 
English
Publication Date: June 01, 2003
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1262003 Pages: 35
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
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