An Attempt to Estimate the Effects of Interest Rates on Inflation Using the Asymmetry Theory

Povzetek

Interest rates are among the most important variables used by monetary authorities to curb inflation (control price levels). The complex interaction between interest rates and inflation constitutes a central theme in economic research and policymaking. Understanding the dynamic relationship between these two key variables is crucial for designing effective monetary policies and steering economies toward stability.

As a monetary policy instrument, interest rates play a pivotal role in influencing inflationary pressures. This relationship is multifaceted and involves complex dynamics that vary across economic contexts and time horizons. Examining the intricate links between interest rates and inflation provides valuable insights into the mechanisms driving economic fluctuations and helps policymakers maintain price stability and achieve sustainable economic growth.

Inflation is considered one of the major economic problems threatening all countries, regardless of their level of economic development or the nature of their economic systems. Due to its adverse effects, inflation undermines opportunities for economic stability and creates an unfavorable environment for successful development. Monetary policy, more than other macroeconomic policies, is responsible for addressing inflationary pressures, strengthening the value of the domestic currency, and ensuring price stability to promote economic growth and development objectives.