Hitchhiker’s Guide to Inflation in Libya

March 27, 2013

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Serhan Cevik, and Katerina Teksoz. Hitchhiker’s Guide to Inflation in Libya, (USA: International Monetary Fund, 2013) accessed November 21, 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

This paper presents an empirical investigation of inflation dynamics in Libya over the period 1964–2010, using cointegration and error correction models. While inflation inertia is found to be a key determinant of consumer price inflation, the econometric results indicate that government spending, money supply growth, global inflation, and exchange rate pass-through play central roles in the inflation process. These findings are broadly consistent with the experience of other countries that are natural resource dependent. We also find evidence that the imposition and subsequent removal of international sanctions on Libya had a noteworthy impact on consumer price inflation. Collectively, our estimates indicate that the deviations from an equilibrium path initiate significant adjustments in inflation dynamics, and that closer coordination between monetary and fiscal policies would improve the balance between economic growth and price stability.

Subject: Consumer price indexes, Consumer prices, Inflation, Monetary base, Money, Output gap, Prices, Production

Keywords: Consumer price indexes, Consumer price inflation, Consumer prices, Exchange rate pass-through, Global, Inflation, Inflation dynamics, Inflation inertia, Inflation process, International sanctions, Monetary base, Money supply, Money supply growth, Output gap, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/078
Stock No:

WPIEA2013078
ISBN:

9781484353042
ISSN:

1018-5941

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