Inflation Dynamics in Madagascar, 1971-2000

October 1, 2001

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Emilio Sacerdoti, and Yuan Xiao. Inflation Dynamics in Madagascar, 1971-2000, (USA: International Monetary Fund, 2001) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper analyzes the dynamics of inflation in Madagascar in the period 1971-2000, applying cointegration analysis and error correction modeling. The empirical results, based on quarterly data, confirm that there exists a stable money demand relationship, as well as a purchasing power relationship in the long run. The former enters the short-run dynamics of inflation and money growth, while the latter affects the short-run dynamics of the exchange rate only. We also find that an appreciation has a direct negative impact on inflation and that inflation inertia is important. In addition, we conduct FIML estimation of the system and trace the impulse responses to various shocks.

Subject: Demand for money, Exchange rate adjustments, Exchange rates, Foreign exchange, Inflation, Monetary base, Money, Prices

Keywords: Africa, Cointegration, Demand for money, Error correction model, Error correction term, Exchange rate, Exchange rate adjustments, Exchange rates, Growth equation, Inflation, Inflation equation, Inflation inertia, Madagascar, Monetary base, Money demand, Money growth, Nominal exchange rate, Price equation, Rate of return, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/168
Stock No:

WPIEA1682001
ISBN:

9781451858266
ISSN:

1018-5941

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