Strengthening Inflation Forecasting in São Tomé and Príncipe
July 16, 2025
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This paper examines the drivers of inflation in São Tomé and Príncipe and develops a model for forecasting it. It finds that both supply and demand factors contribute to inflation in the country. Supply-side factors consist of inflation inertia, import food prices, and global or regional crises, whereas factors affecting demand are associated with weakened macroeconomic discipline in the leadup to elections. To effectively reduce and manage inflation, a comprehensive policy mix must address both supply and demand factors.
Subject: Economic forecasting, Exchange rate arrangements, Foreign exchange, Inflation, Nominal effective exchange rate, Prices, Taxes, Value-added tax
Keywords: Autoregressive Distributed Lag (ARDL) model, B. inflation structure, Exchange rate arrangements, forecasting inflation, Global, Inflation, inflation development, inflation forecasting, inflation inertia, Nominal effective exchange rate, pegged exchange rate regime, policy mix, São Tomé and Príncipe, supply and demand demand shock, supply and demand shocks, Value-added tax, VAT impact
Pages:
20
Volume:
2025
DOI:
Issue:
116
Series:
Selected Issues Paper No. 2025/116
Stock No:
SIPEA2025116
ISBN:
9798229022712
ISSN:
2958-7875
