Impact of regulated price adjustments on price variability in a very low inflation transition economy: Case of Armenia

Aghassi Mkrtchyan

European Journal of Comparative Economics, 2005, vol. 2, issue 1, 17-39

Abstract: This paper examines the impact of monetary policy and administrative price adjustments on price variability in a low inflation economy characterized by relatively frequent administrative price adjustments. Fluctuations of market determined prices, prices of agricultural goods in particular, are linked to poor synchronization between administrative price changes and monetary policy. If monetary policy does not account for expected changes in administrative prices, demand for free goods shifts, causing fluctuation of prices for agricultural goods, because the supply of these goods is highly inelastic in Armenia. The findings contribute to a better understanding of agricultural price variability during 1998-2002. The impact of macroeconomic policy and structural adjustments on income distribution and rural poverty incidence are also examined. This research has immediate policy implications, since Armenia will continue to undergo major upward price adjustments of regulated prices, which may have a negative impact on income distribution unless aggregate demand management is changed.

Keywords: Inflation; price variability; regulated prices (search for similar items in EconPapers)
JEL-codes: E31 E61 E65 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:liu:liucej:v:2:y:2005:i:1:p:17-39

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