What explains persistent inflation differentials across transition economies?<sup>1</sup>

Hammermann, Felix; Flanagan, Mark

doi:10.1111/j.1468-0351.2009.00347.x

Cited by 10 publications

(12 citation statements)

References 39 publications

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“…(2) For all countries, there is also an inflationary effect of public spending if governments spend inefficiently or keep high expenditures during a period of income growth above the growth of output. For these reasons, we assume that the higher the deficit in the government budget, government spending, and total debt, the higher the inflation (Hammermann and Flanagan, 2009). These variables construct the first version of our model:…”

Section: Modeling Inflationmentioning

confidence: 99%

“…We model inflation with different nonmonetary variables such as GDP growth, unemployment rates, government spending, investment, total government debt, current account balance, and balance of the government budget as proposed by other articles (Cottarelli et al, 1998;Fakher, 2016;Hammermann & Flanagan, 2009). We use two different dummy variables to account for two possible effects of EZ membership on inflation.…”

Section: Introductionmentioning

confidence: 99%

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Inflation and Euro Membership

Dreyer

Schmid

2020

Journal of Economic Integration

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This article aims to investigate the relation between Euro membership and inflation. We construct two models that explain inflation using nonmonetary variables. To estimate these models, we collect yearly panel data for the 28 members of the European Union from 1998 to 2016. Due to the problem of endogeneity associated with some variables, we use the panel GMM following Arellano and Bond (1991) to perform all estimations. Results for the estimations of coefficients do not indicate a relation between membership in the Eurozone and inflation rates, neither for the short nor long term. Thus, the results can be considered contra-evidence for statements that the Euro increases short term inflation of its new members or that it reduces long term inflation rates permanently.

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Section: Modeling Inflationmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Inflation and Euro Membership

Dreyer

Schmid

2020

Journal of Economic Integration

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“…Backé et al (2003) for early attempt to quantify the effect of different factors in Central and Eastern Europe. More recently, Hammermann (2007), Hammermann and Flanagan (2009), Choueiri et al (2008), Mody and Ohnsorge (2007) and Zoli (2009) analysed inflation developments in Central and Eastern Europe. On the issue, see also Dobrinsky (2006), Lommatzsch and Tober (2004) and MacDonald and Wójcik (2008).…”

Section: Introductionmentioning

confidence: 99%

Catching-up and Inflation in Europe

Égert

2010

OECD Economics Department Working Papers

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JT03286762This study analyses the impact of economic catching-up on annual inflation rates in the European Union with a special focus on the new member countries of Central and Eastern Europe. Using an array of estimation methods, we show that the Balassa-Samuelson effect is not an important driver of inflation rates. By contrast, we find that the initial price level and regulated prices strongly affect inflation outcomes in a nonlinear manner and that the extension of Engel's Law may hold during periods of very fast growth. We interpret these results as a sign that price level convergence comes from goods, market and non-market service prices. Furthermore, we find that the Phillips curve flattens with a decline in the inflation rate, that inflation persistence increases and that commodity prices have a stronger effect on inflation in a higher inflation environment. JEL Codes: E43, E50, E52, C22, G21, O52Keywords: European Union; inflation; Balassa-Samuelson; Engel's law; real convergence; catching up; Bayesian model average; non-linearity ********************* Rattrapage économique et inflation en Europe : Balassa-Samuelson, la loi d'Engel et d'autres explicationsCe papier étudie l'influence du rattrapage économique sur l'inflation annuelle dans l'Union européenne avec un accent particulier sur les nouveaux pays membres de l'Europe central et orientale. Les résultats indiquent que l'effet Balassa-Samuelson n'est pas à même d'expliquer les taux d'inflation différents observés dans les pays étudiés. Par contre, le niveau général des prix et les prix règlementés ont un impact significatif et non-linéaire sur l'inflation et la loi d'Engel peut être vérifiée durant des périodes de forte croissance économique. Ces résultats suggèrent que la convergence des niveaux de prix provient de la convergence des niveaux de prix des biens échangeables, des biens non-échangeables marchands et non-marchands. Nos résultats montrent aussi que la courbe de Phillips devient plate avec des taux d'inflation plus faible et que la persistance de l'inflation augmente et les prix des matières premières ont une influence plus forte sur l'inflation lorsque l'inflation est plus élevée.Codes JEL : E32, E62, 21, H30, H60, C33 Mots-clés : Politique budgétaire ; procyclique ; contracyclique ; pays de l'OCDE

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“…Higher relative inflation may have detrimental effects on demand-driven catch-up growth (McCombie and Thirwall 1994) through lowering the price competitiveness of exports. Inflation differentials has been discussed in recent economic literature (Angeloni et al 2006;_ Egert et al 2004;Hammermann and Flanagan 2009;MacDonald and Wójcik 2008). The approach of this article differs because it deals with inflation by using the concept of the Phillips curve.…”

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confidence: 98%