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Prepared by Ksenia Koloskova (EUR), with contributions from Alina Kafarava (local economist, Minsk office).
The parallel exchange rate time series for 1995–2000 is taken from Rusakevich (2002). The local office in Minsk provided data for 2011. Few missing observations have been interpolated.
The data after the 2011 episode is not enough to estimate a VAR with 6 variables and 7 lags. Therefore we cannot directly apply the methodology to the time period of interest. We end the sample in 2008 in this case in order to eliminate any impact of the global financial crisis.
Staff calculations based on authorities’ official documents on price regulation (Presidential decree, CoM Resolutions) and CPI basket data from Belstat.
Calculations are based not on the number of items in the CPI basket, but on the weights of the items in CPI in 2014. For example, fresh milk is only one of many items in the basket, but its weight in the basket is 1.6 percent. This allows evaluating the importance of regulated goods not only in terms of number of regulated items, but also how important these items are for computing CPI inflation.
The only item liberalized in 2012 was tobacco.
Weights of food, non-food and services to CPI are 49 percent, 35 percent and 16 percent respectively.
For example, deregulated component in February 2014 includes prices of goods which were liberalized in November 2013 and January 2014, but not the goods which were liberalized in March 2014.
Beef and pork prices spiked in May 2014 and contributed significantly to overall CPI in 2014. However, this increase was caused not by liberalization per se (which happened in March 2014), but as a reaction to a negative supply shock.
For 2012 the pass-through values from the baseline specification are used (0.6 for unregulated and 0.5 for regulated after one year), while for 2013 and 2014 the pass-through coefficients are based on the sample without outlying months (0.6 for unregulated and 0.1 for regulated after one year). The values are chosen to take into account the possibility of high pass-through from sharp exchange rate depreciation in 2011 on both unregulated and regulated prices next year.