Inflation Dynamics in the CEMAC Region

Abstract

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper analyses inflation dynamics in the Central African Economic and Monetary Community (CEMAC) using a constructed dataset for country-specific commodity price indices and panel cointegrated vector autoregressive (VAR) models. Imported commodity price shocks are significant in explaining inflation in the region. Governments are another driving force of inflation dynamics mainly through controlled prices and the role of capital expenditure in domestic activity. In most CEMAC countries, the largest effect of global food and fuel prices occurs after four or five quarters in noncore inflation and then decays substantially over time. Second-round effects are significant only in Cameroon and to a lesser extent in the Republic of Congo.

Assessing Inflation Convergence in the East African Community

“…Moreover, Aisen and Veiga (2006) document that a higher degree of political instability is associated with a higher level of inflation. Our finding also supports Alper, Hobdari, and Uppal (2016), Walsh (2011) and Caceres, Poplawski-Ribeiro, and Tartari (2013) who emphasise the influences of food inflation. Second, the other group, including shocks to real activities, nominal effective exchange rate, and monetary variables, explains about 55 per cent of inflation variations.…”

Oil prices and inflation dynamics: Evidence from advanced and developing economies

“…Using Vector Autoregressions, Zoli (2009) and Caceres et al (2012) study the impact of commodity price shocks on inflation in Emerging Europe and Central Africa, respectively.…”

“…• Energy subsidies as a share of GDP: A country with a high level of energy subsidy is likely to have a lower inflationary impact from global oil price shocks These subsidies, in fact, distort the price signals from oil price shocks and prevent the correct passthrough of oil price increases to headline inflation, which may further reduce the transmission of monetary policies (Caceres et al, 2012). Data on energy subsidies are taken from Coady et al (2015).…”

Impact of oil price and oil production on inflation in the CEMAC

“…However, due to a frequent lack of data availability, it is only recently that empirical studies have started to focus on developing and emerging economies. For instance, based on quarterly data over 1996-2010, Caceres et al (2012 investigate the impact of global energy and food prices on the consumer price index in four countries of the CEMAC area (Cameroon, the Central African Republic, the Republic of Congo, and Gabon). Applying a Vector Auto Regressive (VAR) methodology, Dynamic Ordinary Least Squares (DOLS) and Fully Modified Ordinary Least Squares (FMOLS), they conclude that energy prices have a positive and significant effect on inflation in Cameroon and Gabon, while the significance of the impact in the Central African Republic (CAR) and Congo highly depends on the econometric model (VAR, DOLS or FMOLS).…”