## Sources of Inflation in Sub-Saharan Africa

_IMF Working Papers, February 1, 2007_

## Source details

**Canonical URL:** [Sources of Inflation in Sub-Saharan Africa](https://www.imf.org/en/publications/wp/issues/2016/12/31/sources-of-inflation-in-sub-saharan-africa-20196)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/sources-of-inflation-in-sub-saharan-africa-20196/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/sources-of-inflation-in-sub-saharan-africa-20196/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/sources-of-inflation-in-sub-saharan-africa-20196/bundle-manifest.json)

## Bibliographic details
- Authors: Shanaka J Peiris, Régis Barnichon
- Published: February 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451865967.001

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### Summary and central findings
- The paper examines the relationship between inflation, the output gap, and the real money gap for seventeen African countries.
- Using heterogeneous panel cointegration estimation techniques, the authors estimate cointegrating vectors for the production function and the real money demand function to recover structural output and money gaps.
- Central finding: both the output gap and the money gap contain significant information regarding the evolution of inflation, with a larger role played by the money gap.
- The analysis finds no significant evidence of asymmetry in the relationship between inflation and the two gaps.

### Methodology
- Estimation approach: heterogeneous panel cointegration estimation techniques.
- Variables and constructs explicitly used:
  - Production function (to recover structural output and output gap).
  - Real money demand function (to recover real money gap).
  - Inflation as the dependent variable explained by the recovered gaps.
- Sample: seventeen African countries (as described in the paper).

### Policy-relevant implications
- Both demand-side (output gap) and monetary (real money gap) indicators provide significant information on inflation dynamics in Sub-Saharan Africa.
- The larger role of the money gap implies that monetary variables and money demand dynamics should be central to inflation monitoring and policy frameworks in the region.
- Absence of significant asymmetry suggests symmetric policy responses to positive and negative deviations in the gaps may be appropriate based on the empirical evidence in this study.

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## Content in this bundle

- **5. A Simple Asymmetric Model**
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  - [5. A Simple Asymmetric Model (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp0732.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/sources-of-inflation-in-sub-saharan-africa-20196_