Modeling Inflation in Croatia
Maruška Vizek () and
Tanja Broz ()
Emerging Markets Finance and Trade, 2009, vol. 45, issue 6, 87-98
This paper constructs a quarterly inflation model for Croatia, using the general-to-specific approach to model inflation dynamics. A two-step procedure is followed. First, we conduct a long-run sectoral analysis of inflation sources, yielding long-run determinants of inflation: markup, excess money, nominal effective exchange rate, and the output gap. Second, we estimate an equilibrium error correction model of inflation, deploying, among other variables of interest, the long-run solutions derived in the first step. The derived model of inflation suggests that inflation inertia and Croatian trading partners' inflation are most important for explaining the short-run behavior of inflation. Apart from these two variables, markup, excess money, output gap, nominal exchange rate, and broad money also contribute to inflation changes in the short run.
Keywords: cointegration; Croatia; general-to-specific; inflation modeling (search for similar items in EconPapers)
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Working Paper: Modelling Inflation in Croatia (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:45:y:2009:i:6:p:87-98
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