Book Description

This thesis analyses inflation dynamics in eight Asian countries. The second chapter analyses inflation persistence and exchange rate pass through (ERPT). The findings on inflation persistence show that for most countries this declines after the Asian financial crisis. The findings for ERPT are more mixed and vary by country. The role of Inflation Targeting Framework (ITF) on inflation persistence and ERPT is also examined. The estimation results suggest it is too early to generalize that ITF exerts a consistently discernible influence on inflation dynamics across this group of Asian ITF countries. The third and fourth chapters focus on the impact that world oil and world food price shocks have on domestic prices. On average, the pass-through of the world oil price is higher than for world food prices. Another finding is that the domestic food supply capacity of a country succeeds in dampening the effect of world food price shocks. The fifth chapter employs disaggregated data on prices to examine inflation dynamics in Indonesia. The main finding is that price behaviour exhibits heterogeneity. Disaggregated prices are more flexible in response to sector specific shocks and are more sluggish in response to macroeconomic shocks. In response to deposit rate shocks, the price puzzle becomes weaker after the full implementation of ITF.