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Africa > Madagascar, Republic of

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  • Type: Journal Issue x
  • Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models x
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Cover IMF Working Papers
Inflation Dynamics in Madagascar, 1971-2000
Mr. Emilio Sacerdoti
and
Mr. Yuan Xiao
The paper analyzes the dynamics of inflation in Madagascar in the period 1971-2000, applying cointegration analysis and error correction modeling. The empirical results, based on quarterly data, confirm that there exists a stable money demand relationship, as well as a purchasing power relationship in the long run. The former enters the short-run dynamics of inflation and money growth, while the latter affects the short-run dynamics of the exchange rate only. We also find that an appreciation has a direct negative impact on inflation and that inflation inertia is important. In addition, we conduct FIML estimation of the system and trace the impulse responses to various shocks.
Keywords:
WP; nominal exchange rate; rate of return; Madagascar; inflation; money demand; exchange rate; cointegration; error correction model; money growth; inflation inertia; inflation equation; price equation; error correction term; growth equation; Exchange rates; Exchange rate adjustments; Demand for money; Monetary base; Africa