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Inflation Dynamics in Bulgaria: The Role of Policies

Author

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  • Anh D. M. Nguyen
  • Hajime Takizawa
  • Iglika Vassileva

Abstract

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.

Suggested Citation

  • Anh D. M. Nguyen & Hajime Takizawa & Iglika Vassileva, 2023. "Inflation Dynamics in Bulgaria: The Role of Policies," IMF Working Papers 2023/212, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2023/212
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    References listed on IDEAS

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