The Nonmonetary Determinants of Inflation: A Panel Data Study

Author/Editor:

Carlo Cottarelli

Publication Date:

March 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper explains inflation performance in a sample of industrial and transition economies by looking at policymakers’ incentives to inflate the economy, and the perceived costs of disinflation. It finds a significant effect of fiscal deficits on inflation, particularly (but not exclusively) in countries where the government securities market is not well developed. Other factors with significant effect on inflation include relative price changes, central bank independence, the exchange rate regime, and the degree of price liberalization; there is only limited evidence that other structural factors, such as those influencing the natural rate of unemployment, have a significant effect on inflation.

Series:

Working Paper No. 1998/023

Subject:

Central bank autonomy Central banks Exchange rate arrangements Financial institutions Foreign exchange Government securities Inflation Labor Prices Unemployment rate

English

Publication Date:

March 1, 1998

ISBN/ISSN:

9781451844016/1018-5941

Stock No:

WPIEA0231998

Pages:

29

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