Inflation in Low-Income Countries
This paper studies the effects of global and domestic inflation shocks on core price inflation in 105 countries between 1970 and 2016, by using a heterogeneous panel vector-autoregressive model. The methodology allows accounting for differences acr...
| Main Authors: | , , , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/410071562700985189/Inflation-in-Low-Income-Countries http://hdl.handle.net/10986/32054 |
| Summary: | This paper studies the effects of global
and domestic inflation shocks on core price inflation in 105
countries between 1970 and 2016, by using a heterogeneous
panel vector-autoregressive model. The methodology allows
accounting for differences across groups of countries
(advanced economies, emerging markets and developing
economies, and low-income countries) and across groups with
different country characteristics (such as foreign exchange
and monetary policy regimes). The empirical results indicate
that most of the variation in inflation among low-income
countries over the past decades is accounted for by external
shocks. More than half of the variation in core inflation
rates among low-income countries is due to global core price
shocks, compared with one-eighth in advanced economies.
Global food and energy price shocks account for another 13
percent of core inflation variation in low-income countries
-- half more than in advanced economies and one-fifth more
than in emerging markets and developing economies. This
points to challenges in anchoring domestic inflation
expectations, which have been most evident among low --
income countries with floating exchange rates, especially in
cases where central bank independence has been weak. |
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