Analysing inflation in developing countries: An econometric study with application to Kenya

This article demonstrates an approach to modelling the inflation rate in developing countries through the use of the annualised monthly inflation rate in an attempt to distinguish between once‐and‐for‐all increases in the price level and a generally rising price level. Our empirical results show that this approach is useful in allowing both monetary and institutional variables to play a role in determining the inflation rate. In addition, we estimate the inflation rate for different income groups and show the changing determinants of the inflation rate across these groups.