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Determinants of Inflation in GCC
Author:
Ms. Magda E. Kandil
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and
Mrs. Hanan Morsy
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Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 082
Language:
English
Publication Date:
01 Apr 2009
DOI:
https://doi.org/10.5089/9781451872293.001
ISBN:
9781451872293
ISSN:
1018-5941
Pages:
34
Keywords:
WP; price inflation; price; exchange rate; Inflation; external shocks; domestic policies; exchange rate pass-through; GCC country; exchange rate depreciation; inflation in trading partners; excess demand; determinants of inflation; inflation in GCC; Exchange rate adjustments; Exchange rates; Capacity utilization
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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Inflationary pressures have heightened in the oil-rich Gulf Cooperation Council (GCC) since 2003. This paper studies determinants of inflation in GCC, using an empirical model that includes domestic and external factors. Inflation in major trading partners appears to be the most relevant foreign factor. In addition, oil revenues have reinforced inflationary pressures through growth of credit and aggregate spending. In the short-run, binding capacity constraints also explain higher inflation given increased government spending. Nonetheless, by targeting supply-side bottlenecks, the increase in government spending is easing capacity constraints and will ultimately help to moderate price inflation.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund