Analysis of inflationary dynamics in Nicaragua
Keywords:
Phillips curve, Inflation, Fiscal Policy, VARAbstract
This study analyzes inflation dynamics in Nicaragua during the period 2010–2023 and its relationship with key macroeconomic variables: output gap, fiscal balance, and trade balance. The objective is to understand the macroeconomic interactions that influence inflation behavior by applying a Vector Autoregression (VAR) model. The results show that inflation in Nicaragua exhibits differentiated patterns over time, with episodes of high volatility linked to internal shocks—such as the 2018 national circumstances and the 2020 pandemic—as well as external shocks, including global inflationary pressures from 2021 to 2023. Cluster analysis reveals four distinct inflationary phases with unique characteristics, while the VAR analysis highlights the significant influence of the output gap, fiscal policy, and external trade on price dynamics. These findings contribute to the design of economic policies aimed at price stability, underscoring the need to consider both internal and external factors to mitigate inflationary pressures and promote sustainable economic growth.
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