Hitchhiker’s Guide to Inflation in Libya

Author/Editor:

Katerina Teksoz ; Serhan Cevik

Publication Date:

March 27, 2013

Electronic Access:

Free Full text (PDF file size is 1315 KB).Use the free Adobe Acrobat Reader to view this PDF file

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:

This paper presents an empirical investigation of inflation dynamics in Libya over the period 1964–2010, using cointegration and error correction models. While inflation inertia is found to be a key determinant of consumer price inflation, the econometric results indicate that government spending, money supply growth, global inflation, and exchange rate pass-through play central roles in the inflation process. These findings are broadly consistent with the experience of other countries that are natural resource dependent. We also find evidence that the imposition and subsequent removal of international sanctions on Libya had a noteworthy impact on consumer price inflation. Collectively, our estimates indicate that the deviations from an equilibrium path initiate significant adjustments in inflation dynamics, and that closer coordination between monetary and fiscal policies would improve the balance between economic growth and price stability.

Series:

Working Paper No. 13/78

Subject:

English

Publication Date:

March 27, 2013

ISBN/ISSN:

9781484353042/1018-5941

Stock No:

WPIEA2013078

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

28

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