<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The paper starts from the assumption that the significant reduction of the inflation problem is a result of the long-term dynamics of economic growth in countries with developing markets and, as a result, operational inability of multinational companies to increase accumulation through the policy of raising prices by creating space for their full expansion. We believe that in such circumstances civil theories on the causes of inflation are dominantly of class character. We check negative repercussions of low inflation on the examples of the countries of South-East Europe, in the regimes with fixed and flexible exchange rates, and with different strategies of monetary policy. We conclude that destructive implications of the financial crisis and psychological factors have a negative impact on a sustainable low-inflation environment, regardless of the monetary-exchange regime. We propose that low and stable inflation rates can be followed by a series of negative implications for the overall economic system, which our analysis of the observed countries proves.</p></abstract>

The paper starts from the assumption that the significant reduction of the inflation problem is a result of the long-term dynamics of economic growth in countries with developing markets and, as a result, operational inability of multinational companies to increase accumulation through the policy of raising prices by creating space for their full expansion. We believe that in such circumstances civil theories on the causes of inflation are dominantly of class character. We check negative repercussions of low inflation on the examples of the countries of South-East Europe, in the regimes with fixed and flexible exchange rates, and with different strategies of monetary policy. We conclude that destructive implications of the financial crisis and psychological factors have a negative impact on a sustainable low-inflation environment, regardless of the monetary-exchange regime. We propose that low and stable inflation rates can be followed by a series of negative implications for the overall economic system, which our analysis of the observed countries proves.

Relevance of Low Inflation in the Southeastern European Countries

University of Montenegro, Faculty of Economics

University of Montenegro, Maritime Faculty

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Relevance of Low Inflation in the Southeastern European Countries"}

The paper starts from the assumption that the significant reduction of the inflation problem is a result of the long-term dynamics of economic growth in...

Relevance of Low Inflation in the Southeastern European Countries

Published Online: May 20, 2016

Page range: 41 - 63

Received: Dec 12, 2015

Accepted: Jan 28, 2016

DOI: https://doi.org/10.1515/jcbtp-2016-0010

Keywords
inflation/deflation, aggregate demand, monetary and fiscal policy, exchange rate/inflation rate targeting

© 2016 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Relevance of Low Inflation in the Southeastern European Countries

Published Online: May 20, 2016

Page range: 41 - 63

Received: Dec 12, 2015

Accepted: Jan 28, 2016

DOI: https://doi.org/10.1515/jcbtp-2016-0010

Keywordsinflation/deflation, aggregate demand, monetary and fiscal policy, exchange rate/inflation rate targeting

© 2016 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
inflation/deflation, aggregate demand, monetary and fiscal policy, exchange rate/inflation rate targeting