Determinants of Low Inflation in an Emerging, Small Open Economy through the Lens of Aggregated and Disaggregated Approach

Karol Szafranek and Aleksandra Hałka

Emerging Markets Finance and Trade, 2019, vol. 55, issue 13, 3094-3111

Abstract: We analyze the sources of the protracted period of exceptionally low inflation in the emerging, small open economy of Poland using a structural Bayesian Vector Autoregression (BVAR) identified with a mixture of zero and sign restrictions. We find that excessive disinflation has been caused by deteriorating domestic conditions whilst deflation has resulted from the convolution of waning global demand and plummeting oil prices. Disaggregated analysis corroborates the conclusion from the aggregated approach but reveals considerable heterogeneities in the sensitivity of inflation components to the identified shocks. We conclude that the structural analysis on the disaggregated price indices unveils additional information for the monetary policy conduct.

Date: 2019
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Related works:
Working Paper: Determinants of low inflation in emerging, small open economy. Comparison of aggregated and disaggregated approaches (2017)
Working Paper: Determinants of low inflation in an emerging, small open economy. A comparison of aggregated and disaggregated approaches (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:55:y:2019:i:13:p:3094-3111

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DOI: 10.1080/1540496X.2018.1541793

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