Determinants of Inflation and Its Instability: A Case Study of a Less Developed Economy

A.-M.M. Abdel-Rahman
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A.-M.M. Abdel-Rahman: Department of Economics King Saud University, Postal: BOX 2454, Riyadh 11451, Kingdom of Saudi Arabia, http://www.ksu.edu.sa/Pages/default.aspx

Economia Internazionale / International Economics, 1998, vol. 51, issue 4, 459-472

Abstract: During the past three decades inflation in Sudan accelerated and was highly variable. Various factors contributed to this acceleration and variability. Predominant among these is the monetary financing of a persistent budget deficit in the country. Other real, expectational and structural factors also contributed to the incidence of this high inflation episode witnessed in the country. This paper investigates the sources of instability in both the mean and variance of inflation. Account of the shifting means is undertaken by shift dummies whereas account of the variable variance is undertaken via Autoregressive Conditional Heteroscedasticity (ARCH) and Error Correction (EC) estimation mechanisms. The analysis exploits recent results on cointegration given the obvious nonstationarity of the data within the high inflation context. In due process, we also trace the nominal, real, structural and expectational determinants of the Sudan inflation.

JEL-codes: E31 (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0287

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