Inflation Dynamics in Yemen: An Empirical Analysis

June 1, 2010

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Format: Chicago

Abdullah Almounsor. Inflation Dynamics in Yemen: An Empirical Analysis, (USA: International Monetary Fund, 2010) accessed November 8, 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

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.

Subject: Econometric analysis, Exchange rates, Foreign exchange, Inflation, Monetary base, Money, Prices, Structural vector autoregression, Vector error correction models

Keywords: And money supply, Demand-pull inflation, Domestic demand, Exchange rates, Inflation, Inflation dynamics, Inflation elasticity, Inflation in Yemen, Inflation response, Inflation shock, Inflation variation, Monetary base, Pass-through, Structural vector autoregression, Variance inflation, Vector error correction models, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/144
Stock No:

WPIEA2010144
ISBN:

9781455201273
ISSN:

1018-5941

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