Hitchhiker's Guide to Inflation in Libya

29 Pages Posted: 25 Apr 2013

See all articles by Serhan Cevik

Serhan Cevik

International Monetary Fund (IMF)

Katerina Teksoz

Columbia University

Multiple version iconThere are 2 versions of this paper

Date Written: March 2013

Abstract

This paper presents an empirical investigation of inflation dynamics in Libya over the period 1964–2010, using cointegration and error correction models. While inflation inertia is found to be a key determinant of consumer price inflation, the econometric results indicate that government spending, money supply growth, global inflation, and exchange rate pass-through play central roles in the inflation process. These findings are broadly consistent with the experience of other countries that are natural resource dependent. We also find evidence that the imposition and subsequent removal of international sanctions on Libya had a noteworthy impact on consumer price inflation. Collectively, our estimates indicate that the deviations from an equilibrium path initiate significant adjustments in inflation dynamics, and that closer coordination between monetary and fiscal policies would improve the balance between economic growth and price stability.

Keywords: Inflation, Libya, Monetary policy, Fiscal policy, Economic models, Inflation, money supply, exchange rate pass-through, international sanctions

JEL Classification: E31, E32, E58, F15, O10

Suggested Citation

Cevik, Serhan and Teksoz, Katerina, Hitchhiker's Guide to Inflation in Libya (March 2013). IMF Working Paper No. 13/78, Available at SSRN: https://ssrn.com/abstract=2256293

Serhan Cevik (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Katerina Teksoz

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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