Fundamental dynamics of inflation across different country groups: Empirical findings

Considering the costs of inflation on national economies, the role of determining inflation dynamics in ensuring economic stability at both national and international levels, and the role of price stability is substantial. A look at the costs of high inflation shows how important it is to determine inflation dynamics on a global scale. Global inflation averaged around 8% in the 1980s, before falling to 6.7% in the 1990s, 4.2% in the early 2000s and 2.5% in the last decade. It is argued that the central banks of developed countries have played a major role in the achievement of price stability in global inflation; especially in the modern understanding of central banking, independent central banks' conservative attitudes towards reversing inflationary processes have been achieved after institutional communication, credibility and advanced monetary control capabilities to manage expectations. The main theme of the study is to compare the macroeconomic determinants of inflation using the data of 75 countries in the period 1980-2019 in eight country groups; lower-middle-upper income, high-moderate-low inflation and countries implementing the inflation targeting regime (IT) as the institutional structure of modern central banking in the fight against inflation and the transition group to IT. The results of the study indicate that the determinants of inflation differ significantly in these groups and that short-term inflationary processes determine long-term inflationary processes. The study also concludes that policymakers need to take into account national macroeconomic determinants rather than global determinants in the fight against inflation, and that institutional structures such as the IT are also a factor that increases policy effectiveness.