Abstract
The goal of this research is to reflect how the gross domestic product, unemployment, real interest rate, savings, government expenditures and value-added tax effect on inflation in selected Balkan countries for period 2008-2016. Research examines the impact of macroeconomic determinants on price movements in the general level, measured by the annual rate of inflation. Selected countries are Albania, Bosnia and Herzegovina, Croatia, Montenegro, North Macedonia, Serbia and Slovenia. This paper includes model where inflation is the dependent variable, while gross domestic product, unemployment, real interest rate, saving, government expenditures and value-added tax represent independent variables. Authors used LLC test and VIF test for stationary and multicollinearity, where confirmed that model is adequately designed. Using Hausman test, fixed effect model is chosen, where results have shown that gross domestic product, unemployment and value-added tax have a statistically significant impact on inflation compared to other explanatory variables in the model.
Highlights
The goal of this research is to reflect how the gross domestic product, unemployment, real interest rate, savings, government expenditures and value-added tax effect on inflation in selected Balkan countries for period 2008-2016
(1999) point out that when a country moves from a planned economy to a market economy, inflation could be a direct problem for the government
There are many determinants which affect on inflation where gross domestic product and unemployment are the most common variables that related with inflation
Summary
There are many determinants which affect on inflation where gross domestic product and unemployment are the most common variables that related with inflation. Malik and Chowdhury (2001) found a positive and statistically significant relationship between inflation and gross domestic product, noting that growth sensitivity on changes of inflation rate is less than inflation sensitivity on changes of economic growth. Ademola and Badira (2016) researched nexus between gross domestic product, inflation and unemployment and noticed there is a positive relationship between these variables. Fadejeva (2014) evaluated the impact of value added tax on inflation and Latvia and found that changes of value-added tax rate could have a significant impact on price movements, whereby it is likely at the time of change rate of this tax In this segment, it is presented the trend of inflation, gross domestic product, unemployment, real interest rate, savings, government expenditures and value-added tax in seven selected economies from 2008 to 2016. There was an increase of 1% or 2%, while Croatia recorded an increase of 3% from the beginning to the end of time period
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