Understanding and Forecasting Inflation in Timor-Leste

Kohei Asao and Raju Huidrom

No 2026/024, IMF Working Papers from International Monetary Fund

Abstract: This paper presents a comprehensive analysis of inflation in Timor-Leste—a post-conflict, low-income economy and small developing state that is fully dollarized. We find that Timorese inflation was high until about mid-2010 and was strongly influenced by swings in global food prices given its high share of food in the CPI basket and heavy reliance on food imports. But inflation has been relatively low and stable in the past decade relative to peers—a period that also broadly coincided with moderate global food prices. We develop an empirical model for Timorese inflation that distills the role of these underlying drivers, and which can be deployed for forecasting inflation.

Keywords: Inflation; Phillips curve; Low-Income Country; Fragile and Conflict State; Dollarization; Timor-Leste (search for similar items in EconPapers)
Pages: 24
Date: 2026-02-06
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