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jme 2015, 10(2): 113-148 Back to browse issues page
Determinants of Inflation in Selected Countries
Samaneh ‎Eftekhari Mahabadi Dr.1, Hasan Kiaee Dr. * 2
1- Department of Statistics‎, ‎Faculty of‎ ‎Mathematical Sciences‎, ‎University of Tehran
2- Faculty of Islamic Studies and Economics Imam Sadiq University
Abstract:   (1418 Views)

This paper focuses on developing models to study influential factors on the inflation rate for a panel of available countries in the World Bank data base during 2008-2012‎. ‎For this purpose‎, Random effect log-linear and Ordinal logistic models are used for the analysis of continuous and categorical inflation rate variables‎. ‎As the original inflation rate response to variables shows an apparent right skewness‎, ‎the log transformation in the linear mixed effect model seems necessery‎. ‎In the ordinal logistic mixed effect model‎, ‎as a new approach‎, ‎the inflation rate variable is categorized based on two threshols to increase model predictibality and precision‎. ‎These two models consider the potential serial correlation between annual infltion rates and categories through introducing some latent random effect parameters‎. ‎The results of both models show that money growth‎, ‎GDP‎, ‎oil price and income levels of the available countries are significant predictors with increasing effect on the next year inflation rate category‎. ‎Using the categorical inflation response variable yields some superior results where government expenditure‎, exchange rate and capital formation are also detected as significant determinants of ordinal inflation variable‎. ‎Also‎, ‎the random effect variance is highly significant in both models which shows the necessery need for consideration of the potential association of inflation variables across time‎. ‎

JEL Classifications: E17, E27, E31, E37, E47 ‎

Keywords: ‎Inflation, Panel studies, Mixed effect Model, Ordinal response
Full-Text [PDF 1173 kb]   (1322 Downloads)    
Type of Study: Research | Subject: Macroeconomics
Received: 2015/11/16 | Accepted: 2016/10/22 | Published: 2016/10/22
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‎Eftekhari Mahabadi S, Kiaee H. Determinants of Inflation in Selected Countries . jme. 2015; 10 (2) :113-148
URL: http://jme.mbri.ac.ir/article-1-151-en.html


Volume 10, Issue 2 (Spring 2015) Back to browse issues page
Journal of Money and Economy Journal of Money And Economy
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