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Disinflation in Transition Economies: The Role of Relative Price Adjustment

Author

Listed:
  • Ms. Sharmini Coorey
  • Mr. Mauro Mecagni
  • Mr. Erik Offerdal

Abstract

In light of the persistence of moderate inflation in many transition economies, this paper analyzes whether inflation resulted from insufficiently tight financial policies and wage pressures or from the protracted adjustment of relative prices. Using a new database for 21 countries, the effect of relative price variability on inflation is estimated within a framework controlling for nominal and real shocks. Money and wage growth were the most important determinants of inflation; relative price variability had a sizable effect at high inflation during initial liberalization and a small effect at moderate inflation. Cost recovery may contribute to variability, particularly in the advanced stages of the transition.

Suggested Citation

  • Ms. Sharmini Coorey & Mr. Mauro Mecagni & Mr. Erik Offerdal, 1996. "Disinflation in Transition Economies: The Role of Relative Price Adjustment," IMF Working Papers 1996/138, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1996/138
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    Citations

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    Cited by:

    1. Bo??tjan Jazbec, 2002. "Real Exchange Rates in Transition Economies," William Davidson Institute Working Papers Series 482, William Davidson Institute at the University of Michigan.
    2. International Monetary Fund, 2008. "Mauritius: Selected Issues," IMF Staff Country Reports 2008/237, International Monetary Fund.
    3. Coricelli, Fabrizio & Jazbec, Bostjan, 2004. "Real exchange rate dynamics in transition economies," Structural Change and Economic Dynamics, Elsevier, vol. 15(1), pages 83-100, March.
    4. Philipp Rother, 2002. "Inflation in Albania," Post-Communist Economies, Taylor & Francis Journals, vol. 14(1), pages 85-107.
    5. Arratibel, Olga & Rodriguez-Palenzuela, Diego & Thimann, Christian, 2002. "Inflation dynamics and dual inflation in accession countries: a 'New Keynesian' perspective," Working Paper Series 0132, European Central Bank.
    6. Mr. Christoph B. Rosenberg & Mr. Tapio Saavalainen, 1998. "How to Deal with Azerbaijan’s Oil Boom? Policy Strategies in a Resource-Rich Transition Economy," IMF Working Papers 1998/006, International Monetary Fund.
    7. Mr. Arvind Subramanian, 1997. "The Egyptian Stabilization Experience: An Analytical Retrospective," IMF Working Papers 1997/105, International Monetary Fund.
    8. Kevin Ross, 2000. "Post-stabilization inflation dynamics in Slovenia," Applied Economics, Taylor & Francis Journals, vol. 32(2), pages 135-149.
    9. Jaanus Raim, 2004. "The Alternative to the Existing System of the Concepts about Purchasing Power Parity Deviations . Derived from the Estonian Experience," Working Papers 115, Tallinn School of Economics and Business Administration, Tallinn University of Technology.

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