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Analyzing Determinants of Inflation When There Are Data Limitation: The Case of Sierra Leone
Author:
Mr. Kadima D. Kalonji
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,
Jan Gottschalk null

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Mr. Ken Miyajima
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Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 271
Language:
English
Publication Date:
01 Dec 2008
DOI:
https://doi.org/10.5089/9781451871296.001
ISBN:
9781451871296
ISSN:
1018-5941
Pages:
40
Keywords:
WP; price level; central bank
Legal-disclaimer:
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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This paper examines the determinants of inflation in Sierra Leone using a structural vector autoregression (VAR) approach to help forecast inflation for operational purposes. Despite data limitations, the paper accurately models inflation in Sierra Leone. As economic theory predicts, domestic inflation is found to increase with higher oil prices, higher money supply, and nominal exchange rate depreciation. The paper then employs a historical decomposition approach to pinpoint the sources of a marked decline in inflation in 2006 and assesses its forecasting properties. Overall, the model serves as a useful addition to the toolkit for analyzing and forecasting inflation in countries with limited data availability.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund