The Determinants of Inflation in Sudan

Kabbashi M . Suliman

Working Papers from African Economic Research Consortium

Abstract: This paper examines the main determinants of inflation in Sudan, using quarterly data during 1970a-2002, by applying cointegration and error correction modelling. The analytical framework views inflation as responding to disequilibria in the internal and external sectors of the economy augmented by the dynamics of the variables determining the equilibrium relationships in these sectors. The results reveal that the external sector's disequilibrium matters for price growth. This signifies a strong long-run impact of foreign price and exchange rate on inflation, with slow adjustment to equilibrium. Inflation is also found to be perpetuated by feedback from the short-run nominal exchange rate, foreign price, drought shocks and deterioration in expectations. Money growth does not appear to affect inflation in the long run, but the elasticity of inflation to the short-run money supply is significant and relatively high. The findings suggest that a monetarycum- exchange rule is more suitable for inflation control while maintaining external competitiveness. Fighting inflation also depends on the ability of policy to reduce the effects of supply shocks emanating from droughts and foreign price movements.

Date: 2012-09
Note: African Economic Research Consortium
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publication.aercafricalibrary.org/123456789/196 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not found

Related works:
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:aer:wpaper:4b6ac67b-b02f-4394-ac07-44b775702bea

Access Statistics for this paper

More papers in Working Papers from African Economic Research Consortium Contact information at EDIRC.
Bibliographic data for series maintained by Daniel Njiru ().