How Do Monetary and Fiscal Determinants Affect Inflation? Evidence from Panel Data Analysis

The article evaluates the effects of certain macroeconomic indicators, including the minimum wage and unemployment, on inflation using panel analysis. Based on panel data covering 2000-2021 for 14 countries with different income levels, the Fixed Effects Model and the GMM model were applied and compared. The results indicate that the money supply's impact on inflation is insignificant. Fiscal measures may be more important if monetary policy does not affect inflation. The GMM model reveals that the minimum wage reduces inflation, while the minimum wage adjusted for purchasing power parity (PPP) increases it. Unemployment has a strong impact on inflation, confirming the Phillips curve theory, which suggests that a decline in unemployment leads to higher inflation.