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Estimation of the impact of global and domestic factors on inflation in Serbia

Author

Listed:
  • Ana Ivkovic, Mirjana Miletic, Savo Jakovljevic
  • Ana Ivkovic

    (National Bank of Serbia)

  • Mirjana Miletic

    (National Bank of Serbia)

  • Savo Jakovljevic

    (National Bank of Serbia)

Abstract

To test the extent to which global and domestic factors have impacted the inflation dynamics in Serbia in the past fifteen years, we have applied three approaches in this paper: 1. the principal component analysis, which allowed us to separate the contribution of global and domestic factors to y-o-y inflation; 2. the estimate of the ARDL model to examine the impact of concrete domestic and global factors on the quarterly inflation rate; 3. the estimate of the SVAR model, based on which we followed the inflation’s response to different shocks from the domestic and international environment. The econometric analysis of the impact of global and domestic factors on inflation in Serbia shows the statistical significance of coefficients for the exchange rate and inflation expectations, indicating the importance of the relative stability of the exchange rate and anchored inflation expectations for domestic inflation. In the period observed, inflation was influenced both by global shocks (rising global primary commodity prices) and domestic factors (dinar’s depreciation against the euro). Their influence is different in subperiods. Since the start of 2017, the exchange rate diminished the variability of inflation, while inflation’s rise since 2021 is led primarily by global factors.

Suggested Citation

  • Ana Ivkovic, Mirjana Miletic, Savo Jakovljevic & Ana Ivkovic & Mirjana Miletic & Savo Jakovljevic, 2022. "Estimation of the impact of global and domestic factors on inflation in Serbia," Working Papers Bulletin 8, National Bank of Serbia.
    • Handle: RePEc:nsb:bilten:8
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    References listed on IDEAS

    as
    1. Aleksandra Hałka & Karol Szafranek, 2016. "Whose Inflation Is It Anyway? Inflation Spillovers Between the Euro Area and Small Open Economies," Eastern European Economics, Taylor & Francis Journals, vol. 54(2), pages 109-132, March.
    2. Kamber, Güneş & Wong, Benjamin, 2020. "Global factors and trend inflation," Journal of International Economics, Elsevier, vol. 122(C).
    3. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-162, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    inflation; global factors; domestic factors; principal component analysis; structural VAR;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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