Essays on inflation dynamics

Date

2024-8

Author

Yusifzada, Tural

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This thesis comprises three distinct essays that examine inflation dynamics, with a particular emphasis on emerging economies. The primary focus of the first essay is to explore the factors contributing to high and volatile inflation in emerging economies as compared to advanced economies. Adopting a structural, institutional, and historical perspective, this essay delves into how global imbalances within the world system lead to distinct inflation dynamics in emerging and advanced economies. The essay posits that exchange rate dynamics resulting from imbalances in the balance of payments, insufficient supply chain systems, the institutional power of firms, asymmetric price settings, and unanchored inflation expectations are the principal causes of high and volatile inflation in emerging economies relative to advanced ones. Building upon insights from structural and institutional inflation dynamics, the second essay examines the determinants of "high inflation." By employing a panel probit model to assess the likelihood of "high inflation" occurrences, the essay develops a novel early warning model for "high inflation." This model underscores that exchange rates serve as the primary driver of "high inflation," with approximately 25% depreciation signaling a "high inflation" probability exceeding 80% in middle-income countries and 70% in high-income countries. The third essay takes a novel approach by exploring climate change as a previously unexplored determinant of inflation. Initially, it consolidates five critical climate variables into a distinct climate index to assess short- and long-term climate change. Using this innovative index, the essay finds that 77% of the analyzed countries are significantly affected by climate change.

Subject Keywords

Inflation, Structural/Institutional Dynamics, High Inflation, Early Warning Model, Exchange Rate

URI

https://hdl.handle.net/11511/110606

Collections

Graduate School of Social Sciences, Thesis