What Triggers Inflation in Emerging Market Economies?

This study aims at investigating the factors associated with the start of 24 inflation episodes in 15 emerging market economies (EMEs) between 1980 and 2001. The paper employs pooled probit analysis to estimate the contribution of the key factors to inflation starts. The empirical results suggest that increases in the output gap, agricultural shocks, and expansionary fiscal policy raise the probability of inflation starts in EMEs. The findings also indicate that a more democratic environment and an increase in capital flows relative to GDP reduce the probability of inflation starts.