A1676
Title: Demand-pull or cost-push a Markov switching approach using Australian data
Authors: Pu Chen - Melbourne Institute of Technology (Australia) [presenting]
Abstract: Using Markov switching to differentiate between demand-pull and cost-push drivers of inflation provides valuable insights into the dynamics of the economy. Markov switching identifies different states or regimes within inflation data, allowing for the quantification of the probabilities and likelihood of each driver at any given point in time. This information is crucial for policymakers in designing effective inflation-fighting strategies and understanding the transmission mechanism of inflation. By examining the transition probabilities between regimes, policymakers can assess the impact of shocks or changes in economic conditions on the likelihood of transitioning from one driver to another. This approach enables policymakers to make more informed decisions to effectively manage inflation and maintain macroeconomic stability.
