Determinants of Inflation in GCC

April 1, 2009

Preview Citation

Format: Chicago

Magda E. Kandil, and Hanan Morsy. Determinants of Inflation in GCC, (USA: International Monetary Fund, 2009) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Inflationary pressures have heightened in the oil-rich Gulf Cooperation Council (GCC) since 2003. This paper studies determinants of inflation in GCC, using an empirical model that includes domestic and external factors. Inflation in major trading partners appears to be the most relevant foreign factor. In addition, oil revenues have reinforced inflationary pressures through growth of credit and aggregate spending. In the short-run, binding capacity constraints also explain higher inflation given increased government spending. Nonetheless, by targeting supply-side bottlenecks, the increase in government spending is easing capacity constraints and will ultimately help to moderate price inflation.

Subject: Capacity utilization, Exchange rate adjustments, Exchange rates, Expenditure, Foreign exchange, Inflation, Prices, Production

Keywords: Capacity utilization, Determinants of inflation, Domestic policies, Excess demand, Exchange rate, Exchange rate adjustments, Exchange rate depreciation, Exchange rate pass-through, Exchange rates, External shocks, GCC country, Inflation, Inflation in GCC, Inflation in trading partners, Price, Price inflation, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/082
Stock No:

WPIEA2009082
ISBN:

9781451872293
ISSN:

1018-5941

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