Since consumer prices are a weighted average of the prices of domestic and of imported consumption goods, and producer prices feed into final consumer prices, wholesale price inflation should cause consumer price inflation. Moreover, there should exist a long-term equilibrium relationship...

The paper examines how relative price shocks can affect the price level and then inflation. Using Indian data, it is observed that: (1) Price increases exceed price decreases. Aggregate inflation depends on the distribution of relative price changes — inflation rises when the distribution is...

An optimizing model of a small open emerging market economy (SOEME) with dualistic labour markets and two types of consumers, delivers a tractable model for monetary policy. Differences between the SOEME and the SOE are derived. Parameters depend on features of the labour market and on...

In a simple open economy macromodel, calibrated to the typical institutions and shocks of a densely populated emerging market economy, it is shown that a monetary stimulus preceding a temporary supply shock can abort inflation at minimum output cost, since of the appreciation of exchange rates,...