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Inflation and Conflict in Iraq: The Economics of Shortages Revisited
Author:
Udo Kock null

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Mr. David A. Grigorian
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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 159
Language:
English
Publication Date:
01 Jul 2010
DOI:
https://doi.org/10.5089/9781455201426.001
ISBN:
9781455201426
ISSN:
1018-5941
Pages:
24
Keywords:
WP; price; core inflation; administered price; headline inflation
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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Containing inflation has turned out to be one of the most challenging aspects of economic management in Iraq. This paper posits that conventional as well as unconventional factors explain inflation dynamics in the recent past. We build a theoretical model based on the insights into the workings of socialist economies under supply shortages provided by Shleifer and Vishny (1992) to help explain price dynamics. In the model, strategic behavior of the fuel distribution monopolist results in fuel shortages, with implications for fuel and non-fuel inflation. A number of step-wise adjustments of administered prices for fuel products since December 2005 offer an interesting experiment to help study this behavior. Our findings show that inflation may have been influenced by shortages in fuel and non-fuel commodity supplies, which themselves are driven by violence and rent-seeking.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund