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Understanding the Inflationary Process in the GCC Region: The Case of Saudi Arabia and Kuwait

Author/Editor: Hasan, Maher | Alogeel, Hesham
Authorized for Distribution: August 1, 2008
Electronic Access: Free Full Text (PDF file size is 391KB)
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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 investigates the factors that affect inflation in the GCC region by examining the inflationary processes in Saudi Arabia and Kuwait. The paper utilizes a model that accounts for foreign factors affecting inflation, such as trading partners' inflation and exchange rate pass-through effect, as well as domestic influences. The analysis concludes that, in the long run, higher inflation in trading partners' countries is the main driving force for inflation in the two countries, with significant but lower contributions from the exchange rate pass-through effect and oil prices. Demand and money supply shocks affect inflation in the short run.
 
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Series: Working Paper No. 08/193
Subject(s): Inflation | Saudi Arabia | Kuwait | Money supply | Exchange rate stability | Bilateral trade | Cooperation Council for the Arab States of the Gulf
Author's keyword(s): Inflation | trading partners’ inflation | pass-through effect | demand shocks | excess money supply | error correction model (ECM).
 
English  
    Published:   August 1, 2008        
            Format:   Paper
    Stock No:   WPIEA2008193   Pages:   37
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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