TY - BOOK ID - 138830772 TI - Inflation Dynamics in the Western Balkans AU - Minasyan, Gohar. AU - Ozturk, Ezgi. AU - Pinat, Magali. AU - Wang, Mengxue. AU - Zhu, Zeju. PY - 2023 SN - 9798400235900 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Bosnia and Herzegovina KW - Macroeconomics KW - Economics: General KW - Inflation KW - Foreign Exchange KW - Price Level KW - Deflation KW - Prices, Business Fluctuations, and Cycles: Forecasting and Simulation KW - Agriculture: Aggregate Supply and Demand Analysis KW - Prices KW - Commodity Markets KW - Energy: Demand and Supply KW - Economic & financial crises & disasters KW - Economics of specific sectors KW - Currency KW - Foreign exchange KW - Food prices KW - Commodity price shocks KW - Energy prices KW - Nominal effective exchange rate KW - Currency crises KW - Informal sector KW - Economics UR - https://www.unicat.be/uniCat?func=search&query=sysid:138830772 AB - After trailing Euro Area inflation closely in the recent past, inflation in the Western Balkans has accelerated faster since early 2022 on the back of the shocks to global commodity prices, strong recovery from the pandemic, and lingering supply bottlenecks. This paper employs two complementary empirical approaches of an augmented Phillips curve and structural VAR, adapting them to the data availability and country specificities of the Western Balkans, to analyze the inflation dynamics in the region. It finds that international food prices affect not only headline but also core inflation as well as inflation expectations. Further, inflation in the Western Balkans is not just determined by foreign shocks, and domestic factors, aggregate demand shocks in particular, have a significant impact on inflation. These findings imply a possible role for policies to temporarily limit an immediate and complete pass-through of international to domestic food prices while also stressing the importance of an appropriate domestic macroeconomic policy mix to keep inflation expectations anchored and safeguard credibility in the face of high inflation persistence. ER -