Examining Determinants of Regional Inflation Heterogeneity — A Robust Panel Data Analysis

Abstract

This study examines the impact of different factors on inflation in six regions of the world between 2002 and 2021, analyzing variables such as control of corruption, political stability, broad money growth, GDP growth, and imports to exports ratio. This study seeks to investigate the crucial factors that cause inflation and their significance in different regions. The feasible generalized least square (FGLS) results indicate that the determinants of inflation vary in different regions, but broad money growth consistently increases inflation across all six regions, while control of corruption and political stability reduce inflation in most regions. The study has business implications for political stability and its contribution to inflation control. This should be taken into account when making investment choices by businesses operating in politically insecure regions. The study also highlights how crucial it is to control the growth of broad money and comprehend how GDP growth and inflation are related. Policymakers should establish effective inflation control measures that take into consideration the unique elements driving inflation in their region. JEL Classification: E31, P24, P44