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

June 1, 2003

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Format: Chicago

Bogdan Lissovolik. Determinants of Inflation in a Transition Economy: The Case of Ukraine, (USA: International Monetary Fund, 2003) accessed December 25, 2024

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 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.

Subject: Consumer price indexes, Demand for money, Exchange rates, Foreign exchange, Inflation, Monetary base, Money, Prices

Keywords: Asia and Pacific, Baltics, Broad money, Central and Eastern Europe, Cointegration, Consumer price indexes, Demand for money, Eastern Europe, Exante inflation projection, Exchange rates, Food price deflation, Inflation, Inflation development, Inflation equation, Inflation inertia term, Inflation process, Monetary base, Money demand, Output gap, Price determination, Services price, Single-equation model, Stabilization effort, Transition, Transition inflation study, Ukraine, World inflation, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/126
Stock No:

WPIEA1262003
ISBN:

9781451854923
ISSN:

1018-5941

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