Appendix I: Data Issues
Appendix II: Structural Model Assumptions
Barnichon, Regis and Shanaka J. Peiris, 2007, “Sources of Inflation in Sub-Saharan Africa,” IMF Working Paper 07/32 (Washington: International Monetary Fund).
Blavy, Rodolphe, 2004, “Inflation and Monetary Pass-Through in Guinea,” IMF Working Paper 04/223 (Washington: International Monetary Fund).
Gueorguiev, Nikolay, 2003, “Exchange Rate Pass-Through in Romania,” IMF Working Paper 03/130 (Washington: International Monetary Fund).
Hassett, Kevin and Glen Hubbard, 1999, “Inflation and the User Cost of Capital: Does Inflation Still Matter?” NBER Working Paper No. 6046.
International Monetary Fund, 2007, Sudan—Staff Report for the 2007 Article IV Consultation and Staff-Monitored Program, IMF Country Report No. 07/343 (Washington: International Monetary Fund).
Kireyev, Alexei, 2001, “Financial Reforms in Sudan: Streamlining Bank Intermediation,” IMF Working Paper 01/53 (Washington: International Monetary Fund).
Leigh and Rossi, 2002, “Exchange Rate Pass-Through in Turkey,” IMF Working Paper 02/204 (Washington: International Monetary Fund).
McCarthy, Jonathan, 2000, “Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrial Economies,” Staff Report No. 111 (New York: Federal Reserve Bank of New York).
Mwase, Nkunde, 2006, “An Empirical Investigation of the Exchange Rate Pass-Through to Inflation in Tanzania,” IMF Working Paper 06/150 (Washington: International Monetary Fund).
Nassar, Koffie, 2005, “Money Demand and Inflation in Madagascar,” IMF Working Paper 05/236 (Washington: International Monetary Fund).
The author would like to thank Dr. Sabir Hassan (Governor of the Central Bank of Sudan), Osman Al-Sayyed (Assistant Governor of the Central Bank of Sudan), Adam Bennett, Hassan Al-Atrash, Todd Schneider, and attendants of the seminar held at the Central Bank of Sudan for their useful comments and suggestions.
Murabahah is a trade financing contract. Typically, an islamic bank purchases a product (commodity, raw material, etc.) to supply an entrepreneur who does not have his own capital to do so. The bank and the entrepreneur agree on a profit margin which is added to the cost of the product. Payment is delayed for a specific period of time during which the entrepreneur produces the final product and sells it to the market. In the contract, the bank must take the ownership of the product on sale. For details, see Iqbal and Mirakhor (2007).
Musharakah is a form of partnership contract where two or more people combine their capital to share the profits and losses, and where they have similar rights and liabilities. For more details, see Iqbal and Mirakhor (2007).
The spike in inflation in transportation sector after September 2006 was caused by the one-off cut in fuel subsidy in August 2006.
McCarthy’s original paper used quarterly data for eight variables (oil price inflation, the output gap, exchange rate change, import price inflation, Producer Price Index (PPI) inflation, CPI inflation, short-term interest rate, and money growth) to estimate the pass-through rate of nominal appreciation on import price inflation assuming a recursive structure of an economy.
Impulse responses trace the effect of a one-time shock to one of the innovations (or error terms in the VAR system) on current and future values of the endogenous variables in the VAR system.
Hassett and Hubbard (1999). The surge in the user cost of capital by an increase in inflation is caused by (i) rising nominal interest rate and (ii) (accounting) depreciation is based on the nominal value of capital stock at installment, implying that inflation would reduce the benefits of tax allowances on depreciation.
Sudan lacks an import price index, which is typically used to estimate such pass-through effects.