Inflation dynamics and food prices in an agricultural economy : the case of Ethiopia, Vol. 1 of 1

About

Countries

Data & Research

Learning

News

Projects & Operations

Publications

Topics

Home > Data & Research > Research > Document Search > Report Details

Inflation dynamics and food prices in an agricultural economy : the case of Ethiopia

Author:	Loening, Josef L.; Durevall, Dick; Birru, Yohannes A.;	Collection Title:	Policy Research working paper ; no. WPS 4969
Country:	Ethiopia;	Date Stored:	2009/06/18
Document Date:	2009/06/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	Africa
Report Number:	WPS4969	SubTopics:	Markets and Market Access; Currencies and Exchange Rates; Economic Theory & Research; Emerging Markets; Food & Beverage Industry
Volume No:	1 of 1

Summary: Ethiopia has experienced a historically unprecedented increase in inflation, mainly driven by cereal price inflation, which is among the highest in Sub-Saharan Africa. Using monthly data from the past decade, the authors estimate error correction models to identify the relative importance of several factors contributing to overall inflation and its three major components, cereal prices, food prices, and non-food prices. The main finding is that, in a longer perspective, over three to four years, the main factors that determine domestic food and non-food prices are the exchange rate and international food and goods prices. In the short run, agricultural supply shocks and inflation inertia strongly affect domestic inflation, causing large deviations from long-run price trends. Money supply growth does affect food price inflation in the short run, although the money stock itself does not seem to drive inflation. The results suggest the need for a multi-pronged approach to fight inflation. Forecast scenarios suggest monetary and exchange rate policies need to take into account cereal production, which is among the key determinants of inflation, assuming a decline in global commodity prices. Implementation of successful policies will be contingent on the availability of foreign exchange and the performance of agriculture.


Official Documents Official, scanned versions of documents (may include signatures, etc.)
File Type		Description	File Size (mb)

	PDF 59 pages	Official version*	4.13 (approx.)
	Text	Text version**

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.

** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: http://go.worldbank.org/RM22WQ5VU0