Effectiveness of anti-inflation policy that ensures economic growth: Evidence from post-Soviet countries
-
DOIhttp://dx.doi.org/10.21511/ppm.21(2).2023.50
-
Article InfoVolume 21 2023, Issue #2, pp. 542-555
- Cited by
- 432 Views
-
142 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
There are active debates on the scale of inflation-economic growth causality in the short- and long-term perspectives and factors affecting the correlation and effectiveness of anti-inflationary measures depending on initial economic conditions. These scientific debates result in controversial results. This study aims to explore short- and long-run relationships in the inflation-economic growth chain of 12 post-Soviet countries (Azerbaijan, Estonia, Latvia, Lithuania, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Belarus, Moldova, Ukraine, and Georgia) to determine the most effective system of anti-inflationary policy. The paper employed statistical analysis and trend line extrapolation (analysis of inflationary trends in 2000–2021 and forecast for 2022–2024), pooled mean group of the autoregressive distributed lag model in the Stata 14.2/SE software (identification of the short and long-run coefficients characterizing relationships between inflation and economic growth), and ordinary least squares regression (country-specific modeling results). Statistical analysis showed that Latvia, Lithuania, and Estonia have the most effective anti-inflationary policy; Azerbaijan, Kazakhstan, Kyrgyzstan, and Moldova demonstrate moderate effectiveness, and the other countries have low effectiveness. It is also established that in the long run, a 1% increase in inflation results in a 0.195% decrease in GDP growth with a 99% confidence probability, while in the short run, this causal relationship is insignificant. Country-specific modeling results revealed that within 12 post-Soviet countries, economic growth in Kazakhstan, Lithuania, and Ukraine in a short-term perspective depends on inflation dynamics. According to the modeling results, Lithuania has the most effective anti-inflationary policy to ensure sustainable economic growth.
- Keywords
-
JEL Classification (Paper profile tab)C23, E31, O47
-
References39
-
Tables16
-
Figures0
-
- Table 1. Descriptive statistics
- Table 2. Consumer price index forecasted value for 2023–2024
- Table 3. Short-run dependency coefficients
- Table 4. Long-run dependency coefficients
- Table 5. Regression results for Azerbaijan
- Table 6. Regression results for Belarus
- Table 7. Regression results for Estonia
- Table 8. Regression results for Georgia
- Table 9. Regression results for Kazakhstan
- Table 10. Regression results for Kyrgyzstan
- Table 11. Regression results for Latvia
- Table 12. Regression results for Lithuania
- Table 13. Regression results for Moldova
- Table 14. Regression results for Tajikistan
- Table 15. Regression results for Ukraine
- Table 16. Regression results for Uzbekistan
-
- Aden, K. (2021). Does the perception of government integrity differ across regions? A comparative study between several sub-Saharan and Asian countries. Geopolitics under Globalization, 4(1), 1-12.
- Aliyeva, A. (2022). Post-oil period in Azerbaijan: Economic transformations, anti-inflation policy and innovations management. Marketing and Management of Innovations, 2, 268-283.
- Atigala, P., Maduwanthi, T., Gunathilake, V., Sathsarani, S., & Jayathilaka, R. (2022). Driving the pulse of the economy or the dilution effect: Inflation impacting economic growth. PLoS ONE, 17(8), e0273379.
- Bardy, R., & Rubens, A. (2022). Weighing externalities of economic recovery projects: An alternative to green taxonomies that is fairer and more realistic. Business Ethics and Leadership, 6(3), 23-34.
- Barro, R. J. (1995). Inflation and economic growth (Quarterly Bulletin 1995 Q2). Bank of England.
- Bilan, Y., Tiutiunyk, I., Lyeonov, S., & Vasylieva, T. (2020). Shadow economy and economic development: A panel cointegration and causality analysis. International Journal of Economic Policy in Emerging Economies, 13(2), 173-193.
- Bouyacoub, B. (2022). Inflation targeting and economic growth in the Middle East and North Africa (MENA): Empirical modeling using ARDL approach. Financial Markets, Institutions and Risks, 6(1), 5-12.
- Bruno, M., & Easterly, W. (1995). Inflation crises and long-run growth (NBER Working Papers 5209). National Bureau of Economic Research, Inc.
- Eggoh, J. C., & Khan, M. (2014). On the non-linear relationship between inflation and economic growth. Research in Economics, 68(2), 133-143.
- Fakhrunnas, F., Astuti, R. D., & Anto, M. B. H. (2022). Determinants of non-performing financing in Indonesian Islamic banks: A regional and sectoral analysis. Banks and Bank Systems, 17(4), 72-86.
- Gentle, P. F. (2022). Book review on Frank N. Pieke and Koichi Iwabuchi (2021). Global East Asia: Into the twenty-first century. Business Ethics and Leadership, 6(4), 118-120.
- Gentle, P. F. (2023). Book review on Stephen L. Morgan (2021). The Chinese economy. Business Ethics and Leadership, 7(1), 122-124.
- Huseynova, L., & Huseynov, A. (2023). Management of international trade in the context of ensuring innovative development. Marketing and Management of Innovations, 1, 87-98.
- Ilmas, N., Amelia, M., & Risandi, R. (2022). Analysis of the effect of inflation and exchange rate on exports in 5-year ASEAN countries (years 2010–2020). Jurnal Ekonomi Trisakti, 2(1), 121-132.
- Izvorski, I., Lokshin, M. M., Roseman Norfleet, J. R., Singer, D., & Torre, I. (2023). Europe and Central Asia economic update, spring 2023: Weak growth, high inflation, and a cost-of-living crisis. Washington, DC: World Bank.
- Jałtuszyk, G. (2023). Inflation, global financial crisis, and COVID-19 pandemic. Journal of Management and Financial Sciences, 46, 9-19.
- Khan, M. S., & Senhadji, A. S. (2001). Threshold effects in the relationship between inflation and growth. IMF Staff Papers, 48(1), 1-21.
- Kremer, S., Bick, A., & Nautz, D. (2013). Inflation and growth: New evidence from a dynamic panel threshold analysis. Empirical Economics, 44(2), 861-878.
- Lyeonov, S., Vasilyeva, T., Bilan, Y., & Bagmet, K. (2021). Convergence of the institutional quality of the social sector: The path to inclusive growth. International Journal of Trade and Global Markets, 14(3), 272-291.
- Lyulyov, O., Lyeonov, S., Tiutiunyk, I., & Podgórska, J. (2021). The impact of tax gap on macroeconomic stability: Assessment using panel VEC approach. Journal of International Studies, 14(1), 139-152.
- Mallik, G., & Chowdhury, A. (2001). Inflation and economic growth: Evidence from four south Asian countries. Asia-Pacific Development Journal, 8(1), 123-135.
- Maria, A. T., & Suresh, G. (2023). Determinants of credit risk: Empirical evidence from Indian commercial banks. Banks and Bank Systems, 18(2), 88-100.
- Maris, M. (2022). Management of competitiveness in the EU member states: The main strengths and weaknesses. Marketing and Management of Innovations, 2, 110-120.
- Msomi, T. S., & Olarewaju, O. M. (2022). Dynamic panel investigation of the determinants of South African commercial banks’ operational efficiency. Banks and Bank Systems, 17(4), 35-49.
- Nasir, M. S., Oktaviani, Y., & Andriyani, N. (2022). Determinants of non-performing loans and non-performing financing level: Evidence in Indonesia 2008–2021. Banks and Bank Systems, 17(4), 116-128.
- Njegovanović, A. (2023). Financial evolution and interdisciplinary research. Financial Markets, Institutions and Risks, 7(1), 71-95.
- Olonila, A., Amassoma, D., & Babatunde, B.O. (2023). Impact of monetary policy on credit and investment in Nigeria (1981–2020). Financial Markets, Institutions and Risks, 7(1), 136-144.
- Sala-i-Martin, X. (1994). Cross-sectional regressions and the empirics of economic growth. European Economic Review, 38(3-4), 739-747.
- Shafizada, E., & Aslanova, N. (2022). Innovative approaches to model and forecast of Azerbaijan’s economic growth. Marketing and Management of Innovations, 2, 198-208.
- Sinaga, A. P. A. (2022). Inflation, foreign exchange, interest rate, trade balance, payment balance on growth in the Covid-19 pandemic. SocioEconomic Challenges, 6(4), 52-59.
- Solow, R. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70, 65-94.
- Tahat, I. (2023). The sensitivities of Jordan housing demand to macroeconomic factors: Demand supply analysis model application. SocioEconomic Challenges, 7(1), 65-74.
- Tahat, I. A. M. (2022). Association between factors likely to have an influence on foreign direct investment: The case of Jordan. SocioEconomic Challenges, 6(4), 34-45.
- Tenzin, U. (2019). The nexus among economic growth, inflation and unemployment in Bhutan. South Asia Economic Journal, 20(1), 94-105.
- Tiutiunyk, I., Cieśliński, W., Zolkover, A., & Vasa, L. (2022). Foreign direct investment and shadow economy: One-way effect or multiple-way causality? Journal of International Studies, 15(4), 196-212.
- Vasilyeva, T., Kuzmenko, O., Kuryłowicz, M., & Letunovska, N. (2021). Neural network modeling of the economic and social development trajectory transformation due to quarantine restrictions during Covid-19. Economics and Sociology, 14(2), 313-330.
- Vasylyeva, T. A., Leonov, S. V., & Lunyakov, O. V. (2014). Countercyclical capital buffer as a macroprudential tool for regulation of the financial sector. Actual Problems of Economics, 158(8), 278-283.
- Vysochyna, A., Molotok, I., Babenko, V., Merezhko, V., Holynska, O., & Rud, I. (2022). Impact of municipal financial resilience on sustainable economic development: Case of Ukraine. Review of Economics and Finance, 20, 662-668.
- Zolkover, A., Tiutiunyk, I., Babenko, V., Melnychuk, M., Ivanchenkova, L., & Lagodiienko, N. (2022). The quality of tax administration, macroeconomic stability and economic growth: Assessment and interaction. Review of Economics and Finance, 20, 654-661.