The End of Moderate Inflation in Three Transition Economies?

40 Pages Posted: 15 Apr 2002

See all articles by Josef C. Brada

Josef C. Brada

Arizona State University (ASU) - Economics Department

Ali M. Kutan

Southern Illinois University at Edwardsville

Date Written: January 2002

Abstract

This paper examines the moderation of inflation in three transition economies, the Czech Republic, Hungary and Poland at the end of the 1990s. We argue that the institutions for the conduct of monetary policy in these countries were relatively weak and that monetary policy was unsupported by fiscal policy and hampered by multiple objectives. Using a VAR model of inflation, we show that, under a variety of assumptions, foreign prices and the persistence of inflation were the key determinants of inflation in these countries. From this finding we conclude that the moderation of inflation in the Czech Republic, Hungary and Poland was due largely to the decline in import prices from 1997 on, and thus it is likely be a temporary phenomenon.

Keywords: Monetary and fiscal policy, transition economies, moderate inflation and inflation targeting

JEL Classification: P2, E5

Suggested Citation

Brada, Josef C. and Kutan, Ali M., The End of Moderate Inflation in Three Transition Economies? (January 2002). Available at SSRN: https://ssrn.com/abstract=305324 or http://dx.doi.org/10.2139/ssrn.305324

Josef C. Brada (Contact Author)

Arizona State University (ASU) - Economics Department ( email )

Box 873806
Tempe, AZ 85287-3806
United States
602-965-6524 (Phone)
602-965-0748 (Fax)

HOME PAGE: http://www.mesharpe.com/eee_main.htm

Ali M. Kutan

Southern Illinois University at Edwardsville ( email )

Department of Economics and Finance AH-3141
Edwardsville, IL 62026-1102
United States
618-650-3473 (Phone)
618-650-3047 (Fax)

HOME PAGE: http://https://ideas.repec.org/e/pku30.html

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