Determinants of Inflation in GCC

Magda Kandil and Hanan Morsy

No 2009/082, IMF Working Papers from International Monetary Fund

Abstract: Inflationary pressures have heightened in the oil-rich Gulf Cooperation Council (GCC) since 2003. This paper studies determinants of inflation in GCC, using an empirical model that includes domestic and external factors. Inflation in major trading partners appears to be the most relevant foreign factor. In addition, oil revenues have reinforced inflationary pressures through growth of credit and aggregate spending. In the short-run, binding capacity constraints also explain higher inflation given increased government spending. Nonetheless, by targeting supply-side bottlenecks, the increase in government spending is easing capacity constraints and will ultimately help to moderate price inflation.

Keywords: WP; price inflation; price; exchange rate; Inflation; external shocks; domestic policies; exchange rate pass-through; GCC country; exchange rate depreciation; inflation in trading partners; excess demand; determinants of inflation; inflation in GCC; Exchange rate adjustments; Exchange rates; Capacity utilization (search for similar items in EconPapers)
Pages: 34
Date: 2009-04-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=22863 (application/pdf)

Related works:
Journal Article: Determinants of Inflation in GCC (2011)
Journal Article: DETERMINANTS OF INFLATION IN GCC (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2009/082

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().