Tag: unit root

Author: Igor Pelipas, BEROC.

Generally speaking, inflation persistence can be defined as the speed at which inflation returns to its equilibrium level after a shock. Since 1995, the dynamics of inflation in Belarus is affected by the various internal and external shocks, which, in turn, cause the structural breaks in the corresponding historical data. The deep currency crisis in 2011 led to a huge increase of inflation, and reached a three-digit value. In the current year, the reduction of inflation is one of the most vital problems for the Belarusian authorities. In this context, the understanding of inflation persistence in Belarus is of great importance for appropriate monetary policy and macroeconomic stabilization measures. Additionally, the issue of inflation persistence is topical in the debates on the possibilities of inflation targeting in Belarus. There is an extensive body of literature on the inflation persistence in the US, the EU member states, and in other countries. Inflation persistence, however, has not yet been a subject of analysis in Belarus. In this policy brief, we have attempted to fill the gap by presenting the results of an inflation persistence assessment in Belarus.

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