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Inflation Dynamics in Yemen: An Empirical Analysis
Author:
Abdullah Almounsor null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 144
Language:
English
Publication Date:
01 Jun 2010
DOI:
https://doi.org/10.5089/9781455201273.001
ISBN:
9781455201273
ISSN:
1018-5941
Pages:
23
Keywords:
WP; demand-pull inflation; inflation dynamics; Inflation; pass-through; domestic demand; and money supply; inflation response; inflation elasticity; variance inflation; inflation variation; inflation shock; inflation in Yemen; Monetary base; Exchange rates; Vector error correction models; Structural vector autoregression
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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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Yemen has had a high and volatile rate of inflation in recent years. This paper studies the underlying determinants of inflation dynamics in Yemen using three different approaches: (i) a single equation model, (ii) a Structural Vector Autoregression Model, and (iii) a Vector Error Correction Model. The outcomes suggest that inflation dynamics in Yemen are driven by international price shocks, exchange rate depreciation, domestic demand shocks, and monetary innovations. The impact of international prices and exchange rate depreciation indicate a significant pass-through of import prices. In the short run, external shocks of international prices and the exchange rate account for most variations in inflation, but domestic shocks to money supply and domestic demand explain larger variations in the medium term.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund