Understanding Inflation Dynamics: The Role of Global Shocks in CEMAC

By Johanna Tiedemann, Olivier Bizimana, Lluis Dalmau, Martin Ambassa

March 8, 2024

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Johanna Tiedemann, Olivier Bizimana, Lluis Dalmau, and Martin Ambassa. Understanding Inflation Dynamics: The Role of Global Shocks in CEMAC, (USA: International Monetary Fund, 2024) accessed December 22, 2024

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.

Summary

As in the rest of the world, inflation in CEMAC surged more quickly and persistently than expected during the 2021–23 period. This paper examines the drivers of inflation dynamics and the contribution of global shocks to inflation persistence in CEMAC. We use a Phillips curve framework combined with the local projections method. Our results confirm the prominent role of global factors in driving inflation dynamics. Global commodity food and oil price fluctuations, and shipping costs are the main factors explaining the large variability in headline inflation. Further, we find that global price shocks have sizable and persistent effects on domestic headline inflation, with differences in the magnitude and speed of pass-through. The pass-through from commodity food price fluctuations to headline inflation is higher and more persistent than that of other global price shocks, reflecting the large share of food in the consumption baskets, which makes inflation more vulnerable to direct effects of international food shocks, but also larger second-round effects.

Subject: Commodity price shocks, Commodity prices, Food prices, Inflation, Oil prices, Prices

Keywords: Baseline result, CEMAC, Commodity food price fluctuation, Commodity price shocks, Commodity prices, Food prices, Global, Inflation, Inflation development, Inflation dynamics, Inflation expectation, Oil prices, Phillips curve, Price shock, Shipping costs, Underlying inflation

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/055
Stock No:

WPIEA2024055
ISBN:

9798400269639
ISSN:

1018-5941

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