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Gregorio Impavido
Inflation in Barbados is mainly imported. But how are external shocks transmitted to the domestic economy? Shouldn’t there be also a domestic component, albeit very small, given the presence of capital controls? We focus on short term dynamics and contribute to the existing literature in three ways: (i) we identify the process with which inflation expectations are likely to be formed in Barbados; (ii) we add forward looking inflation expectations as one of the main channels through which external monetary shocks are transmitted to the economy; and (iii) we measure the importance of domestic shocks. We find that due to the peg, forward-looking inflation expectations in the reserve currency country are an important component of the inflation expectation process in Barbados and that they are a key channel in the international monetary transmission mechanism. Domestic factors, mainly monetary shocks, also matter given the limited degree of monetary autonomy provided by capital controls.
Gregorio Impavido and Ms. Uma Ramakrishnan

.188 0.000 0.000 0.037 ogap t −0.061 0.031 0.309 −0.135 −0.027 H0 = 0 −2.227 0.919 3.390 −6.457 −1.384 p-value 0.026 0.360 0.002 0.000 0.175 mst t 0.001 0.048 0.261 −0.195 0.160 H0 = 0 0.060 1.496 4.304 −5.673 3.470 p-value 0.952 0.137 0.000 0.000 0.001 Obs 426 120 36 48 36 V. Conclusions 32. In this paper, we decompose inflation determinants in Barbados between external and domestic factors . We estimate a New-Keynesian Phillips

Brieuc Monfort and Santiago Peña
This article uses two analytical methodologies to understand the dynamics of inflation in Paraguay, the mark-up theory of inflation and the monetary theory of inflation. We also study the impact of different monetary aggregates. The results suggest that monetary factors, in particular currency in circulation, play a major role in determining long-run inflation, while foreign prices, in particular from Brazil, or some food products have a large impact on the short-term dynamics of inflation. Wage indexation may also contribute to locking up price increases.
Brieuc Monfort and Santiago Peña

This article uses two analytical methodologies to understand the dynamics of inflation in Paraguay, the mark-up theory of inflation and the monetary theory of inflation. We also study the impact of different monetary aggregates. The results suggest that monetary factors, in particular currency in circulation, play a major role in determining long-run inflation, while foreign prices, in particular from Brazil, or some food products have a large impact on the short-term dynamics of inflation. Wage indexation may also contribute to locking up price increases.

International Monetary Fund. Research Dept.

Development? Evidence from a New Dataset Tressel, Thierry; Detragiache, Enrica No. 08/266 A New Database of Financial Reforms Abiad, Abdul; Detragiache, Enrica; Tressel, Thierry No. 08/267 Dynamic Factor Price Equalization and International Income Convergence François, Joseph; Shiells, Clinton R. No. 08/268 Efficiency and Performance of Bulgarian Private Pensions Impavido, Gregorio No. 08/269 One-Size-Fits-One: Tailor-Made Fiscal Responses to Capital Flows Zakharova, Daria No. 08/270 Inflation

Ms. Uma Ramakrishnan and Mr. Athanasios Vamvakidis
A reliable inflation-forecasting model is central for a sound monetary policy framework. In this paper, we study the domestic and international transmission effects on inflation in Indonesia and analyze the possible leading indicators of inflation. We identify the exchange rate, foreign inflation, and monetary growth as the main variables with a significant predictive power for inflation in Indonesia.