Abstract
This article analyses the demand and supply aspects of the determinants of CPI inflation in Lithuania in 1998–2008. Content analysis was used to identify and group significant demand and supply inflation factors and using RGT, objectively assess and generalize the results. Pair linear correlation analysis confirmed the significance for CPI inflation of the factors identified through content analysis, and both research methods reliably and effectively helped to identify factors for regression models of inflation. Content analysis revealed that the causes of inflation most often mentioned and traditionally regarded as significant in the economic literature are factors such as money and wages, capital, competition and monopolies, and so on. Pair correlation research showed the significance for inflation of supply and demand factors such as income distribution, income levels, taxes, saving, human capital and labour productivity as well as exports and imports – things which content analysis gave only average or little mention. Regression models confirmed and helped to concretize the significance for inflation of the identified demand and supply factors. The results of the research show that inconsistent monetary and general government expenditure policies reinforce private consumption and capital shocks. Note that human capital and employment, which changed little during the analysed period, did not show the large significance for inflation that they are commonly thought to have.
Highlights
For inflation linked to poverty, the assertion is important that the true objective of intense monetary policy is to reduce real wages (Keynes 1978), which leads to lower purchasing power and aggregate demand
By the method of Content analysis, we chose factors of supply (12), demand (8), rational expectations, (5) and economic equilibrium (3), which are important for inflation
Analysis of the strength of relations and pair linear correlation For the second stage of the research we choose factors created by the content analysis, except for the force majeure, the factors of marginal capital of product, the Spearman rank correlation coefficient and IS, which are high enough but their uncertainty on the aspect of demand is one of the highest. In this stage of research we evaluate straight and near to straight dependence (Miškinis, 2010) between double correlation of consumer price index (CPI) inflation counted in Lithuania in 1998–2008, e. g. in the period of one cycle (1997, CPI – 8.4 percent and 2008, CPI – 8.5 percent) and factors of demand and supply of inflation chosen by using the method of content analysis
Summary
The importance of formalisation for this method makes it possible to “objectively examine” the literature sources and “get sufficient information about the solution of the problems raised” It helps to assess the link between the factors analysed and the research object (inflation, prices) and among themselves. In the selected sources we identify 25 authors who analyse demand and supply aspects of the causes of inflation and price formation Their works rather effectively describe the following categories of factors: money, wages, capital, competition and monopoly, and so on.
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