Cover IMF Working Papers
Inflation Dynamics in Madagascar, 1971-2000
Author: Mr. Emilio Sacerdoti and Mr. Yuan Xiao
Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 168
Language:
English
Publication Date:
01 Oct 2001
DOI:
https://doi.org/10.5089/9781451858266.001
ISBN:
9781451858266
ISSN:
1018-5941
Pages:
27
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
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund