Examining Country-specific and Global Factors of Inflation Dynamics: The Curious Case of Baltic States

This article addresses the emergence of double-digit inflation in the Baltic states during 2022 and 2023, following decades of price stability.Utilizing monthly data spanning from January 2010 to February 2023, our study aims to comprehensively analyse the inflation dynamics in the Baltic context, considering both domestic and global factors.Through the application of the fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) methodologies, we identify significant influences such as exchange rate fluctuations, food and energy price movements and geopolitical events, notably the ongoing conflict in Ukraine.Our findings contribute to a deeper understanding of the determinants of inflation in the Baltic region, offering insights essential for informed policymaking aimed at mitigating vulnerabilities to future inflationary shocks.