Inflation and Monetary Pass-Through in Guinea
20 Pages Posted: 9 Feb 2006
Date Written: December 2004
Abstract
The paper analyzes the dynamics of inflation in Guinea during 1992-2003 applying cointegration and error-correction modeling to a bivariate model that includes consumer price and monetary variables. The empirical results, based on quarterly data, confirm the existence of a long-run relationship between money supply and consumer prices. This paper argues further that the pass-through has increased in recent years. Short-term dynamics are shown to accentuate the long-run impact. Impulse response analysis shows that a shock in the money stock will have an increasing impact over two years and will then stabilize at a higher level.
Keywords: Guinea, inflation, money supply, cointegration, error correction model
JEL Classification: C32, E31, E52, O55
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