Determinants of Inflation in a Transition Economy: The Case of Ukraine
IMF Working Papers, June 1, 2003
Source details
- Canonical URL
- Determinants of Inflation in a Transition Economy: The Case of Ukraine
Other formats
Bibliographic details
- Authors: Bogdan Lissovolik
- Published: June 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451854923.001
Study scope and objective
- Examines determinants of inflation in Ukraine during 1993-2002 in a cointegrating framework.
- Tests two theoretical models: a markup model and a money market model.
- Author: Bogdan Lissovolik.
- Date: June 1, 2003.
- Publication: IMF Working Papers, Working Paper No. 2003/126, Pages: 36, DOI: https://doi.org/10.5089/9781451854923.001.
Methodology
- Empirical approach: cointegration analysis across the full sample and subsamples (including 1996-2002).
- Two competing specifications evaluated:
- Markup model (single-equation, emphasizes administered prices and markup behavior).
- Money market model (broad money relationship with CPI).
Key empirical findings
- Broad money is cointegrated with the CPI for the whole sample (1993-2002) and for early subsamples.
- Cointegration between broad money and CPI ceases to be statistically significant between 1996-2002, in part because of strong remonetization.
- The mark-up model provides a more consistent and well-fitting overall framework for 1996-2002 data.
- Administered prices play a greater role in the CPI within a fairly mainstream inflation process for the 1996-2002 period.
- Broad money participates clearly in short-term inflation determinants despite weakening long-run cointegration in 1996-2002.
Monetary transmission and inflation dynamics
- "Long-term" monetary transmission mechanism operates through:
- The exchange rate.
- Wages.
- Short-term inflation determinants include broad money.
- The study highlights inflation inertia terms and price determination that incorporate services prices and output gap considerations.
Explanation for the sharp decline of inflation over 2000-2002
- Prudent macroeconomic policies.
- Grain harvests.
- Administrative decisions.
Subject areas and keywords (as provided)
- Consumer price indexes, Demand for money, Exchange rates, Foreign exchange, Inflation, Monetary base, Money, Prices.
- Keywords include: 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.
Source: Bogdan Lissovolik, "Determinants of Inflation in a Transition Economy: The Case of Ukraine", IMF Working Paper No. 2003/126, June 1, 2003, Pages: 36, DOI: https://doi.org/10.5089/9781451854923.001.
Content in this bundle
- Determinants of Inflation in a Transition Economy: The Case of Ukraine - WP/03/126