AN EMPIRICAL STUDY OF FACTORS AFFECTING INFLATION IN REPUBLIC OF TAJIKISTAN
Abstract
This paper investigates the core factors affecting the price level in Republic of Tajikistan during 2005 to 2012 by using ‘auto regressive distributed lags’ and Johansen-Juselius co-integration models. The empirical analysis is based on a dataset of demand pull and cost push inflation indicators. Our findings revealed that in the long run, exchange rate, world wheat prices, world oil prices and labor supply Granger cause the price level. Nevertheless, in the short run, only world wheat price and labor supply has significant impact. In case of demand pull inflation, in the long run, GDP gap, remittances inflow, and real wages are endogenously determined in the system as they significantly affect the price level. But in the short run, GDP gap, remittances inflow, broad money, government expenditure and real wages Granger causes the price level.
Furthermore, there is a bi-directional Granger causality between GDP gap and remittances inflow. Also, real wage Granger causes the government expenditures. The GDP gap Granger causes the real wage, implying the scenario that a major cause of under production is the low level of employment. Finally the price level also Granger causes the real wage, is a reflection of a negative relationship between them.
References
[2] Agenor, P. and Montiel, P. (1999). Development Macroeconomics. Princeton University Press, New Jersey, United Kingdom.
[3] Al-Eyd, A., Amaglobeli, D., Shukurov, B., and Sumlinski, M. (2012). Global Food Price Inflation and Policy Responses in Central Asia. IMF Working Paper Series No. WP/12/86. http://www.imf.org/ external/pubs/ft/wp/2012/wp1286.pdf (accessed September 23, 2013).
[4] Alturki, F. and Vtyurina, S. (2010). Inflation in Tajikistan: Forecasting Analysis Monetary Policy Challenges. IMF Working Paper Series No. WP/10/17. http://www.imf.org/external/pubs/ft/wp/2010/ wp1017.pdf (accessed July 10, 2013).
[5] Asian Development Bank Report. 2011. Global Food Price Inflation and Developing Asia. http://203.131.219.245/oldbranches/n_puey/news/world%20bank/Global%20Food%20Price%20Inflation%20and%20Developing%20Asia.pdf (accessed September 27, 2013).
[6] Ul-Haq, A. and Ul-Haq, Anwar. (2012). Determinants of Inflation in Pakistan. Universal Journal of Management and Social Science No. 2(4). http://cprenet.com/uploads/archive/UJMSS_12-1134.pdf (accessed July 10, 2013).
[7] Bastos, C. P. M. (2002). Price stabilization in Brazil: a classical interpretation for an indexed nominal interest rate economy. University of Hong Kong Libraries, ISBN/ISSN: 0493782419. http://sunzi.lib. hku.hk/ER/detail/hkul/2679635 (accessed July 14, 2013).
[8] Bernholz, P. (2003). Monetary Regimes and Inflation: History, Economic and Political Relationships. Edward Elgar Publishing Limited.
[9] Cheng, H. L and Papi, L. (1997). An Econometric Analysis of the Determinant of Inflation in Turkey. IMF Working Paper Series No. WP / 97 / 170 http://www.imf.org/external/pubs/ft/wp/wp97170.pdf (accessed May 25, 2013).
[10] Fischer, S., Ratna, S. and Végh, C. (2002). Modern hyper- and high inflations. Journal of Economic Literature XL(3): 837-880.
[11] Freedman, C. and Otker-Robel, I. (2010). Important Elements IRU Inflation Targeting for Emerging Economies. IMF Working Paper Series No. WP/10/113. http://www.imf.org/external/pubs/ft/wp/2010/ wp10113.pdf (accessed November 14, 2013).
[12] Gemayel, E. R, Jahan, S. and Peter, A. (2011). What Can Low-Income Countries Expect from Adopting Inflation Targeting? IMF Working Paper Series No. WP/11/276. http://www.imf.org/ external/pubs/ft/wp/2011/wp11276.pdf (accessed on November 14, 2013).
[13] Kibritçioğlu, A. (2002). Causes of Inflation in Turkey. A Literature Survey with Special Reference to Theories of Inflation. Forthcoming in: Inflation and Disinflation in Turkey, ed. by Kibritçioğlu, A., L.Rittenberg, and F. Selçuk, Aldershot: Ashgate, pp. 43-76.
[14] Byung-Yeon, K. (2001). Determinants of Inflation in Poland: A Structural Co-integration Approach, Discussion Papers No. 16. Institute of economics in Transition BOFIT. Bank of Finland.
[15] Leheyda, N. (2005). Determinants of Inflation in Ukraine: a Co-integration Approach, University of Mannheim, Center for Doctoral Studies in Economics and Management (CDSEM).
[16] Maliszewski W. (2003). Modeling of Inflation in Georgia. IMF Working Paper Series No. WP/03/212. http://www.imf.org/external/pubs/ft/wp/2003/wp03212.pdf (accessed November 9, 2013).
[17] Meraj, M. (2013). Impact of globalization and trade openness on economic growth in Bangladesh, Ritsumeikan Journal of Asia Pacific Studies (RJAPS) 32: 40-50.
[18] National Bank of Tajikistan’s Inflation Review (2012). http://nbt.tj/files/Monetary_policy/obzor_infl/ obzor_infl_12_2012_tj.pdf (accessed November 9, 2013).
[19] Paksha P. B., and Zaman, H. (2013). When and why does Bangladesh’s Inflation differ from Indian’s? Working Paper Series No. 1301. Chief Economist Unit (CEU). http://www.bb.org.bd/pub/research/ workingpaper/wp1301.pdf (accessed November 12, 2013).
[20] Ranaweera, T. (2003). Market Disequilibria and Inflation in Uzbekistan, 1994-2000. World Bank Policy Reserch Paper 3144. http://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-3144 (accessed November 13, 2013).
[21] Sims, C. A. (1980). Macroeconomics and Reality, Econometerica 48(1):1-49. wne.uw.edu.pl/ uploads/Main/macroeconomics_and_reality.pdf (accessed November 13, 2013).
[22] Tashrifov, M.-Y. (2005). Monetary Policy Model of Tajikistan: A Structural Vector Autoregression Approach. Working Papers Series 05-9. Asia Pacific School of Economics and Government. Australian National University.
[23] Zavkiev, Z. (2005). Estimating a model of Inflation in Tajikistan. CAMA Working Paper Series No. 26/2005. Australian National University. https://cama.crawford.anu.edu.au/pdf/working-papers/2005/ 272005.pdf (accessed July 13, 2013).
Non-Exclusive License under Attribution 4.0 International Public License (CC BY 4.0):
This ‘Article’ is distributed under the terms of the license CC-BY 4.0., which lets others distribute, remix, adapt, and build upon this article, even commercially, as long as they credit this article for the original creation. ASERS Publishing will be acknowledged as the first publisher of the Article and a link to the appropriate bibliographic citation (authors, article title, volume issue, page numbers, DOI, and the link to the Published Article on ASERS Publishing’ Platform) must be maintained.