 INFLATIONARY EXPECTATIONS IN ETHIOPIA: SOME PRELIMINARY RESULTSJosef Loening and Hideki Takada () Applied Econometrics and International Development, 2008, vol. 8, issue 2, 159-176 Abstract: We analyze short-run dynamics of inflation in Ethiopia, using a parsimonious error-correction model fitted with monthly observations. Our findings show that increased money supply and the nominal exchange rate significantly affect inflation in the short-run. Agricultural output shocks, proxied by a cereal-weighted agricultural production index, are also important. By providing an accommodative financial environment, our findings suggest that monetary policy in Ethiopia triggers price inertia, which has large and persistent effects. A simulation suggests that monetary policy alone may be unfeasible to control inflation effectively. To circumvent an extreme tightening with discouraging impacts on growth, additional measures are needed. These should improve the transparency and credibility of monetary policy, and reduce structural barriers that affect price formation and market efficiency. Keywords: Ethiopia; Error-correction Model; Inflation; Inertia. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eaa:aeinde:v:8:y:2008:i:2_13 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Applied Econometrics and International Development from Euro-American Association of Economic Development |
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