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Inflation Dynamics in Yemen: An Empirical Analysis

Author/Editor: Almounsor, Abdullah
Authorized for Distribution: June 1, 2010
Electronic Access: Free Full Text (PDF file size is 593KB)
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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: Yemen has had a high and volatile rate of inflation in recent years. This paper studies the underlying determinants of inflation dynamics in Yemen using three different approaches: (i) a single equation model, (ii) a Structural Vector Autoregression Model, and (iii) a Vector Error Correction Model. The outcomes suggest that inflation dynamics in Yemen are driven by international price shocks, exchange rate depreciation, domestic demand shocks, and monetary innovations. The impact of international prices and exchange rate depreciation indicate a significant pass-through of import prices. In the short run, external shocks of international prices and the exchange rate account for most variations in inflation, but domestic shocks to money supply and domestic demand explain larger variations in the medium term.
 
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Series: Working Paper No. 10/144
Subject(s): Inflation | Economic models | Prices | External shocks | Exchange rate depreciation | Demand | Money supply | Yemen, Republic of
Author's keyword(s): Inflation | pass-through | domestic demand | and money supply
 
English  
    Published:   June 1, 2010        
            Format:   Paper
    Stock No:   WPIEA2010144   Pages:   23
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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