Inflation Dynamics in Bulgaria: The Role of Policies

By Anh D. M. Nguyen, Hajime Takizawa, Iglika Vassileva

September 29, 2023

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Anh D. M. Nguyen, Hajime Takizawa, and Iglika Vassileva. Inflation Dynamics in Bulgaria: The Role of Policies, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper analyses inflation dynamics in Bulgaria using different complementary econometrics technics. We find that common factors play a large role in the EU’s inflation variation but impact individual countries differently due to country-specific factors. Greater weight of energy and food in Bulgaria’s CPI basket amplifies the impact of shocks on headline inflation. Furthermore, second-round effects in Bulgaria are likely pronounced, associated with a higher inflation persistence compared to the EU countries. Recent ECB monetary tightening has been insufficient for Bulgaria and its transmission is weak. Fiscal policy supported the recovery from the COVID crisis but added to inflation.

Subject: Energy prices, Fiscal policy, Food prices, Inflation, Inflation persistence, Prices

Keywords: ECB interest rates, ECB Policy rate, Energy prices, Fiscal policy, Food prices, Global, HICP inflation, Inflation, Inflation development, Inflation dynamics, Inflation in EU country, Inflation persistence, Inflation variation, Monetary policy, Phillips curve, Principal Component Analysis, VARl Sign restrictions.

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/212
Stock No:

WPIEA2023212
ISBN:

9798400256660
ISSN:

1018-5941

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