Long run determinants and short run dynamics of inflation in Tunisia

Abstract

The essential idea of this study is to analyse the origins of inflation at short and long runs in Tunisia relying on annual data during the period 1962 to 2003. We also suggest a model that has a structure determined by monetary and structural factors, and estimated by Johansen's cointegration technique. The empirical results show that inflation is explained by mixed factors: monetary ones such as money supply, the interest rate and the real effective exchange rate; and structural ones like the nominal average annual wage rate, the import prices and the real output. The analysis aims at pointing out the long run determinants of inflation and studying its short run dynamics.

A Test of the Fiscal Theory of Price Level: Case Study of Nigeria

“…The volume of trade may be increased due increase in imports. Darrat (1997), Deme and Fayissa (1995) and Boujelbene and Boujelbene (2010) find that import prices are an important determinant for the level of inflation. Several studies Boschi and Girardi (2007), Darrat (1997), El-Sakka and Ghali (2005) and Boujelbene and Boujelbene (2010) have also taken into account of countries exchange rates when explaining the level of inflation.…”

“…Darrat (1997), Deme and Fayissa (1995) and Boujelbene and Boujelbene (2010) find that import prices are an important determinant for the level of inflation. Several studies Boschi and Girardi (2007), Darrat (1997), El-Sakka and Ghali (2005) and Boujelbene and Boujelbene (2010) have also taken into account of countries exchange rates when explaining the level of inflation. Furthermore, Kandil (2005) and Kose et al (2012) show that the cost of borrowing capital (interest rates) is an important determinant for inflation especially on the cost-push side.…”