Modeling Inflation for Mali
36 Pages Posted: 25 Jan 2008
Date Written: Janurary 2008
Abstract
This paper investigates how consumer price inflation is determined in Mali for 1979-2006 along three macroeconomic explanations: monetarist theories, emphasizing the impact of excess money supply, the structuralist hypothesis, stressing the impact of supply-side constraints, and external theories, describing the effects of foreign transmission mechanisms on a small open economy. The analysis makes use of co-integration techniques and general-to-specific modeling. Average national rainfall, and to a lesser extent deviations from monetary and external sector equilibrium are found to be the main long-run determinants of inflation. The paper offers policy recommendations for controlling inflation in Mali.
Keywords: Inflation, Mali, Real effective exchange rates, Demand for money
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