Inflation Dynamics in the Western Balkans
IMF Working Papers, March 3, 2023
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Bibliographic details
- Authors: Gohar Minasyan, Ezgi O. Ozturk, Magali Pinat, Mengxue Wang, Zeju Zhu
- Published: March 3, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400235184.001
Overview
- Title: Inflation Dynamics in the Western Balkans
- Authors: Gohar Minasyan, Ezgi O. Ozturk, Magali Pinat, Mengxue Wang, Zeju Zhu
- Publication date: March 3, 2023
- Series: Working Paper No. 2023/049
- Issue: 049
- Volume: 2023
- Pages: 38
- DOI: https://doi.org/10.5089/9798400235184.001
- Stock No: WPIEA2023049
- ISBN: 9798400235184
- ISSN: 1018-5941
Research question and methods
- Purpose: Analyze inflation dynamics in the Western Balkans, focusing on drivers of recent acceleration since early 2022.
- Empirical approaches:
- An augmented Phillips curve adapted to Western Balkans data and country specificities.
- A structural VAR adapted to data availability and country specificities.
Key findings
- Recent inflation dynamics:
- After trailing Euro Area inflation closely in the recent past, inflation in the Western Balkans has accelerated faster since early 2022 on the back of the shocks to global commodity prices, strong recovery from the pandemic, and lingering supply bottlenecks.
- Effects of international food prices:
- International food prices affect headline inflation.
- International food prices affect core inflation.
- International food prices affect inflation expectations.
- Role of domestic factors:
- Inflation in the Western Balkans is not just determined by foreign shocks.
- Aggregate demand shocks, in particular, have a significant impact on inflation.
- Inflation persistence and expectations:
- High inflation persistence has been identified, implying risks to anchored inflation expectations if not addressed.
Policy implications and recommendations
- Consider temporary measures to limit immediate and complete pass-through of international to domestic food prices.
- Emphasize an appropriate domestic macroeconomic policy mix to:
- Keep inflation expectations anchored.
- Safeguard credibility in the face of high inflation persistence.
Subjects and keywords
- Subject: Commodity price shocks, Energy prices, Food prices, Foreign exchange, Inflation, Nominal effective exchange rate, Prices
- Keywords: commodity price shocks, Energy prices, Europe, Food prices, Global, Inflation, inflation development, inflation dynamics, inflation expectation, inflation in the Western Balkans, inflations determinant, international food price shocks, Nominal effective exchange rate, panel data, Phillips curve, structural VAR, Western Balkans
IMF Working Papers — Inflation Dynamics in the Western Balkans (Working Paper No. 2023/049), March 3, 2023.
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