Inflation in Low-Income Countries

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...

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Main Authors: Ha, Jongrim, Ivanova, Anna, Montiel, Peter, Pedroni, Peter
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2019
Subjects:
INFLATION
LOW-INCOME COUNTRY
HETEROGENEOUS PANEL VAR MODEL
MONETARY POLICY
EXTERNAL SHOCK
TERMS OF TRADE SHOCK
INFLATION EXPECTATIONS
Online Access:http://documents.worldbank.org/curated/en/410071562700985189/Inflation-in-Low-Income-Countries
http://hdl.handle.net/10986/32054
id okr-10986-32054
recordtype oai_dc
spelling okr-10986-320542022-09-20T00:14:01Z Inflation in Low-Income Countries Ha, Jongrim Ivanova, Anna Montiel, Peter Pedroni, Peter INFLATION LOW-INCOME COUNTRY HETEROGENEOUS PANEL VAR MODEL MONETARY POLICY EXTERNAL SHOCK TERMS OF TRADE SHOCK INFLATION EXPECTATIONS 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. 2019-07-11T15:45:47Z 2019-07-11T15:45:47Z 2019-07 Working Paper http://documents.worldbank.org/curated/en/410071562700985189/Inflation-in-Low-Income-Countries http://hdl.handle.net/10986/32054 English Policy Research Working Paper;No. 8934 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic INFLATION
LOW-INCOME COUNTRY
HETEROGENEOUS PANEL VAR MODEL
MONETARY POLICY
EXTERNAL SHOCK
TERMS OF TRADE SHOCK
INFLATION EXPECTATIONS
spellingShingle INFLATION
LOW-INCOME COUNTRY
HETEROGENEOUS PANEL VAR MODEL
MONETARY POLICY
EXTERNAL SHOCK
TERMS OF TRADE SHOCK
INFLATION EXPECTATIONS
Ha, Jongrim
Ivanova, Anna
Montiel, Peter
Pedroni, Peter
Inflation in Low-Income Countries
relation Policy Research Working Paper;No. 8934
description 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.
format Working Paper
author Ha, Jongrim
Ivanova, Anna
Montiel, Peter
Pedroni, Peter
author_facet Ha, Jongrim
Ivanova, Anna
Montiel, Peter
Pedroni, Peter
author_sort Ha, Jongrim
title Inflation in Low-Income Countries
title_short Inflation in Low-Income Countries
title_full Inflation in Low-Income Countries
title_fullStr Inflation in Low-Income Countries
title_full_unstemmed Inflation in Low-Income Countries
title_sort inflation in low-income countries
publisher World Bank, Washington, DC
publishDate 2019
url http://documents.worldbank.org/curated/en/410071562700985189/Inflation-in-Low-Income-Countries
http://hdl.handle.net/10986/32054
_version_ 1764475692271009792

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