Inflation starts in Latin America and the Caribbean

Abstract

High rates of inflation are a perennial problem in Latin American and Caribbean (LAC) countries. This article attempts to identify the factors that initiate these inflationary episodes using observations on 31 LAC countries between 1970 and 2006. The study finds that the key determinants of inflation starts in the region are demand pressures, oil price shocks, elections, transitions to less repressive political regimes and foreign inflation.

Notes

¹ There are four main regional groupings: (1) the Southern Common Market (MERCOSUR), consisting of Brazil, Argentina, Uruguay, Venezuela and Paraguay; (2) the Andean Community encompassing Bolivia, Colombia, Ecuador and Peru; (3) the Central American Common Market (CACM) encompassing Guatemala, El Salvador, Honduras and Nicaragua, and; (4) the Caribbean Community and Common Market (CARICOM) which embraces 15 Caribbean countries.