Sustainable reduction of inflation remains, even after more than a decade of economic transition, one of the key tasks for the majority of Central and East European countries. In the present paper we employ an iterative multisectoral model underpinned by estimates of sectoral price functions to simulate six disinflation scenarios for the case of Slovenia. The model simulations show that substantial progress in disinflation can be made already in 2004. However, instead of relying on a single anti-inflationary tool, stabilization of the inflation rate at around 3-4 % per annum demands highly harmonized implementation of at least three instruments: moderate de-indexation of wages, rigorous price policy in those segments of the Slovenian economy where lack of competition does not assure price stability, and a prudent monetary policy.
Financed by the National Centre for Research and Development under grant No. SP/I/1/77065/10 by the strategic scientific research and experimental development program:
SYNAT - “Interdisciplinary System for Interactive Scientific and Scientific-Technical Information”.