Ethiopia: Updated Inflation Forecasts

Durevall, Dick and Loening, Josef (2009): Ethiopia: Updated Inflation Forecasts.

Abstract

The purpose of this section is to simulate possible policy scenarios and thus predict the CPI over June 2009 to December 2010 for illustrative purposes. The empirical models are based on Loening, Durevall and Birru (2009). Although highly tentative, our scenarios show that inflation will decrease substantially though inflation inertia may prevent a rapid stabilization of food prices. One of the main driving forces behind domestic inflation is agricultural output growth. While exchange rate and monetary policies can make a significant difference, it is crucial to take into consideration the development of the domestic cereal market. If international prices would start increasing again, they would to have a strong impact on Ethiopia, and the model predictions will not be valid.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inflation; Forecast; Ethiopia
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications

References

Deaton, A. 1999. "Commodity Prices and Growth in Africa." Journal of Economic Perspectives 13(3): 23-40.

Elliott, G. and A. Timmermann. 2008. "Economic Forecasting." Journal of Economic Literature 46(1): 3-56.

Loening, J.L., D. Durevall and Y.A. Birru. 2009. "Inflation dynamics and food prices in an agricultural economy : the case of Ethiopia." World Bank Policy Research Working Paper 4969.