Inflation Dynamics in Bulgaria: The Role of Policies

Anh Nguyen, Hajime Takizawa and Iglika Vassileva

No 2023/212, IMF Working Papers from International Monetary Fund

Abstract: This paper analyses inflation dynamics in Bulgaria using different complementary econometrics technics. We find that common factors play a large role in the EU’s inflation variation but impact individual countries differently due to country-specific factors. Greater weight of energy and food in Bulgaria’s CPI basket amplifies the impact of shocks on headline inflation. Furthermore, second-round effects in Bulgaria are likely pronounced, associated with a higher inflation persistence compared to the EU countries. Recent ECB monetary tightening has been insufficient for Bulgaria and its transmission is weak. Fiscal policy supported the recovery from the COVID crisis but added to inflation.

Keywords: Inflation; Monetary policy; Fiscal policy; ECB interest rates; Phillips curve; Principal Component Analysis; VARl Sign restrictions.; inflation dynamics; HICP inflation; ECB Policy rate; inflation variation; inflation development; inflation in EU country; Energy prices; Inflation persistence; Food prices; Global (search for similar items in EconPapers)
Pages: 32
Date: 2023-09-29
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mon and nep-tra
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