Disinflation in Transition Economies: The Role of Relative Price Adjustment

98 Pages Posted: 15 Feb 2006

See all articles by Sharmini Coorey

Sharmini Coorey

International Monetary Fund (IMF)

Mauro Mecagni

International Monetary Fund (IMF)

Erik Offerdal

affiliation not provided to SSRN

Date Written: December 1996

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.

JEL Classification: E31, P52, C53

Suggested Citation

Coorey, Sharmini and Mecagni, Mauro and Offerdal, Erik, Disinflation in Transition Economies: The Role of Relative Price Adjustment (December 1996). IMF Working Paper No. 96/138, Available at SSRN: https://ssrn.com/abstract=883035

Sharmini Coorey (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mauro Mecagni

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Erik Offerdal

affiliation not provided to SSRN

No Address Available