Inflation Dynamics and Food Prices in an Agricultural Economy : The Case of Ethiopia
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 m...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090618133717 http://hdl.handle.net/10986/4163 |
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okr-10986-4163 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ADVERSE EFFECTS AGGREGATE DEMAND AGRICULTURAL OUTPUT AGRICULTURAL PRICES AGRICULTURE ANNUAL GROWTH ARBITRAGE ASSETS BALANCE OF PAYMENTS BANKING SYSTEM BARTER BLACK MARKET BLACK MARKET EXCHANGE RATE BUSINESS CYCLES CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL GOODS CAPITAL INFLOWS CAPITAL MARKETS CENTRAL BANK CEREAL PRICE CEREAL PRICES CHOW TESTS CLOSED ECONOMY COFFEE PRICES COMMERCIAL BANK COMMERCIAL BANKS COMMERCIALIZATION COMMODITY MARKETS COMMODITY PRICE COMMODITY PRICES COMPETITIVENESS CONSUMER BASKET CONSUMER PRICE CONSUMER PRICE INDEX CONSUMER PRICES CONSUMPTION EXPENDITURE CORRELATION COEFFICIENT CURRENCY DEPRECIATION CURRENCY SUBSTITUTION DEFLATION DEMAND ANALYSIS DEMAND FUNCTION DEPOSIT DEPOSITS DEPRECIATION DEVALUATIONS DISCOUNT RATES DISEQUILIBRIUM DOLLAR EXCHANGE RATE DOMESTIC CURRENCY DOMESTIC DEMAND DOMESTIC GOODS DOMESTIC INFLATION DOMESTIC INVESTORS DOMESTIC MARKET DOMESTIC PRICE DOMESTIC PRICE LEVEL DOMESTIC PRICES DUMMY VARIABLE DUMMY VARIABLES DURABLE GOODS ECONOMETRIC MODEL ECONOMIC GROWTH ENDOGENOUS VARIABLE ENERGY PRICE ENERGY PRICES EQUILIBRIUM LEVEL EQUILIBRIUM PRICES ERROR CORRECTION MODELS ERROR CORRECTION TERM ERROR CORRECTION TERMS EURO EXCHANGE RATE EXCESS DEMAND EXCESS LIQUIDITY EXCESS SUPPLY EXCHANGE RATE EXCHANGE RATE CHANNEL EXCHANGE RATE POLICIES EXCHANGE RATE POLICY EXOGENOUS SHOCK EXPENDITURE EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORT COMPETITIVENESS EXTERNAL FACTORS EXTERNAL MARKETS FACE VALUE FINANCIAL MARKETS FISCAL POLICIES FIXED EXCHANGE RATE FIXED RATE FLOATING EXCHANGE RATE FOOD PRICE FOOD PRICES FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE RATE FOREIGN EXCHANGE RESERVES FOREIGN RESERVES FUTURE INFLATION GDP GROWTH RATE GROWTH RATES HIGH INFLATION IMBALANCES IMPORT IMPORT PRICE IMPORTS INCOME INDEXATION INFLATION INFLATION DYNAMICS INFLATION EXPECTATIONS INFLATIONARY EXPECTATIONS INTEREST RATE INTEREST RATES INTERMEDIATE GOODS INTERMEDIATE PRODUCTS INTERNATIONAL CAPITAL MARKETS INTERNATIONAL MARKET INTERNATIONAL PRICES INTERNATIONAL TRADE INVESTMENT OPPORTUNITIES LOCAL CURRENCY LONG-RUN EQUILIBRIUM LOW INTEREST RATES LOW-INCOME COUNTRIES MACROECONOMIC PERFORMANCE MACROECONOMIC POLICY MARKET CONDITIONS MARKET DISTORTIONS MARKET EQUILIBRIUM MARKET INTEGRATION MARKET PRICES MARKET SHARE MARKET STRUCTURE MARKETING MICROECONOMIC ANALYSIS MONETARY POLICIES MONETARY POLICY MONETARY TRANSMISSION MONEY DEMAND MONEY DEMAND FUNCTION MONEY HOLDINGS MONEY MARKET MONEY MARKETS MONEY STOCK MONEY SUPPLY NATIONAL BANK NOMINAL EXCHANGE RATE OIL PRICE OIL PRICE INFLATION OPEN ECONOMY OUTPUT GAP PARALLEL EXCHANGE RATE PARALLEL MARKET PARALLEL MARKET RATE PHILLIPS CURVE POVERTY REDUCTION PRICE ADJUSTMENTS PRICE CHANGES PRICE DYNAMICS PRICE FLEXIBILITY PRICE FLUCTUATIONS PRICE HIKE PRICE INCREASE PRICE INCREASES PRICE INDEXES PRICE INDICES PRICE INFLATION PRICE LEVEL PRICE LEVELS PRICE SETTING PRICE TRENDS PRODUCER PRICES PUBLIC INVESTMENTS RANDOM WALK RAPID GROWTH RAPID INFLATION RATE OF INFLATION REAL EFFECTIVE EXCHANGE RATE REAL EXCHANGE RATE REAL IMPORTS REAL INTEREST RATE REGIONAL MARKETS RELATIVE PRICE RELATIVE PRICES ROBUSTNESS CHECK STABLE EXCHANGE RATE STRUCTURAL REFORMS SUBSTITUTION SUPPLY SHOCKS SUPPLY-SIDE T-VALUE TIGHT MONETARY POLICY TOTAL EXPORTS TRADABLE GOODS TRADE DEFICITS TRADE PATTERN TRADING PARTNER TRADING PARTNERS TRANSMISSION MECHANISM TRANSMISSION MECHANISMS TRANSPORTATION COSTS TREASURY BILL TREASURY BILLS UNCERTAINTIES UNCERTAINTY UNEMPLOYMENT VOLATILITY WEIGHTS WHOLESALE PRICES WHOLESALERS WORLD MARKET WORLD MARKETS WORLD PRICES |
| spellingShingle |
ADVERSE EFFECTS AGGREGATE DEMAND AGRICULTURAL OUTPUT AGRICULTURAL PRICES AGRICULTURE ANNUAL GROWTH ARBITRAGE ASSETS BALANCE OF PAYMENTS BANKING SYSTEM BARTER BLACK MARKET BLACK MARKET EXCHANGE RATE BUSINESS CYCLES CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL GOODS CAPITAL INFLOWS CAPITAL MARKETS CENTRAL BANK CEREAL PRICE CEREAL PRICES CHOW TESTS CLOSED ECONOMY COFFEE PRICES COMMERCIAL BANK COMMERCIAL BANKS COMMERCIALIZATION COMMODITY MARKETS COMMODITY PRICE COMMODITY PRICES COMPETITIVENESS CONSUMER BASKET CONSUMER PRICE CONSUMER PRICE INDEX CONSUMER PRICES CONSUMPTION EXPENDITURE CORRELATION COEFFICIENT CURRENCY DEPRECIATION CURRENCY SUBSTITUTION DEFLATION DEMAND ANALYSIS DEMAND FUNCTION DEPOSIT DEPOSITS DEPRECIATION DEVALUATIONS DISCOUNT RATES DISEQUILIBRIUM DOLLAR EXCHANGE RATE DOMESTIC CURRENCY DOMESTIC DEMAND DOMESTIC GOODS DOMESTIC INFLATION DOMESTIC INVESTORS DOMESTIC MARKET DOMESTIC PRICE DOMESTIC PRICE LEVEL DOMESTIC PRICES DUMMY VARIABLE DUMMY VARIABLES DURABLE GOODS ECONOMETRIC MODEL ECONOMIC GROWTH ENDOGENOUS VARIABLE ENERGY PRICE ENERGY PRICES EQUILIBRIUM LEVEL EQUILIBRIUM PRICES ERROR CORRECTION MODELS ERROR CORRECTION TERM ERROR CORRECTION TERMS EURO EXCHANGE RATE EXCESS DEMAND EXCESS LIQUIDITY EXCESS SUPPLY EXCHANGE RATE EXCHANGE RATE CHANNEL EXCHANGE RATE POLICIES EXCHANGE RATE POLICY EXOGENOUS SHOCK EXPENDITURE EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORT COMPETITIVENESS EXTERNAL FACTORS EXTERNAL MARKETS FACE VALUE FINANCIAL MARKETS FISCAL POLICIES FIXED EXCHANGE RATE FIXED RATE FLOATING EXCHANGE RATE FOOD PRICE FOOD PRICES FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE RATE FOREIGN EXCHANGE RESERVES FOREIGN RESERVES FUTURE INFLATION GDP GROWTH RATE GROWTH RATES HIGH INFLATION IMBALANCES IMPORT IMPORT PRICE IMPORTS INCOME INDEXATION INFLATION INFLATION DYNAMICS INFLATION EXPECTATIONS INFLATIONARY EXPECTATIONS INTEREST RATE INTEREST RATES INTERMEDIATE GOODS INTERMEDIATE PRODUCTS INTERNATIONAL CAPITAL MARKETS INTERNATIONAL MARKET INTERNATIONAL PRICES INTERNATIONAL TRADE INVESTMENT OPPORTUNITIES LOCAL CURRENCY LONG-RUN EQUILIBRIUM LOW INTEREST RATES LOW-INCOME COUNTRIES MACROECONOMIC PERFORMANCE MACROECONOMIC POLICY MARKET CONDITIONS MARKET DISTORTIONS MARKET EQUILIBRIUM MARKET INTEGRATION MARKET PRICES MARKET SHARE MARKET STRUCTURE MARKETING MICROECONOMIC ANALYSIS MONETARY POLICIES MONETARY POLICY MONETARY TRANSMISSION MONEY DEMAND MONEY DEMAND FUNCTION MONEY HOLDINGS MONEY MARKET MONEY MARKETS MONEY STOCK MONEY SUPPLY NATIONAL BANK NOMINAL EXCHANGE RATE OIL PRICE OIL PRICE INFLATION OPEN ECONOMY OUTPUT GAP PARALLEL EXCHANGE RATE PARALLEL MARKET PARALLEL MARKET RATE PHILLIPS CURVE POVERTY REDUCTION PRICE ADJUSTMENTS PRICE CHANGES PRICE DYNAMICS PRICE FLEXIBILITY PRICE FLUCTUATIONS PRICE HIKE PRICE INCREASE PRICE INCREASES PRICE INDEXES PRICE INDICES PRICE INFLATION PRICE LEVEL PRICE LEVELS PRICE SETTING PRICE TRENDS PRODUCER PRICES PUBLIC INVESTMENTS RANDOM WALK RAPID GROWTH RAPID INFLATION RATE OF INFLATION REAL EFFECTIVE EXCHANGE RATE REAL EXCHANGE RATE REAL IMPORTS REAL INTEREST RATE REGIONAL MARKETS RELATIVE PRICE RELATIVE PRICES ROBUSTNESS CHECK STABLE EXCHANGE RATE STRUCTURAL REFORMS SUBSTITUTION SUPPLY SHOCKS SUPPLY-SIDE T-VALUE TIGHT MONETARY POLICY TOTAL EXPORTS TRADABLE GOODS TRADE DEFICITS TRADE PATTERN TRADING PARTNER TRADING PARTNERS TRANSMISSION MECHANISM TRANSMISSION MECHANISMS TRANSPORTATION COSTS TREASURY BILL TREASURY BILLS UNCERTAINTIES UNCERTAINTY UNEMPLOYMENT VOLATILITY WEIGHTS WHOLESALE PRICES WHOLESALERS WORLD MARKET WORLD MARKETS WORLD PRICES Loening, Josef L. Durevall, Dick Birru, Yohannes A. Inflation Dynamics and Food Prices in an Agricultural Economy : The Case of Ethiopia |
| geographic_facet |
Africa Africa Sub-Saharan Africa East Africa Ethiopia |
| relation |
Policy Research working paper ; no. WPS 4969 |
| description |
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. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Loening, Josef L. Durevall, Dick Birru, Yohannes A. |
| author_facet |
Loening, Josef L. Durevall, Dick Birru, Yohannes A. |
| author_sort |
Loening, Josef L. |
| title |
Inflation Dynamics and Food Prices in an Agricultural Economy : The Case of Ethiopia |
| title_short |
Inflation Dynamics and Food Prices in an Agricultural Economy : The Case of Ethiopia |
| title_full |
Inflation Dynamics and Food Prices in an Agricultural Economy : The Case of Ethiopia |
| title_fullStr |
Inflation Dynamics and Food Prices in an Agricultural Economy : The Case of Ethiopia |
| title_full_unstemmed |
Inflation Dynamics and Food Prices in an Agricultural Economy : The Case of Ethiopia |
| title_sort |
inflation dynamics and food prices in an agricultural economy : the case of ethiopia |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090618133717 http://hdl.handle.net/10986/4163 |
| _version_ |
1764390215969931264 |
| spelling |
okr-10986-41632021-04-23T14:02:15Z Inflation Dynamics and Food Prices in an Agricultural Economy : The Case of Ethiopia Loening, Josef L. Durevall, Dick Birru, Yohannes A. ADVERSE EFFECTS AGGREGATE DEMAND AGRICULTURAL OUTPUT AGRICULTURAL PRICES AGRICULTURE ANNUAL GROWTH ARBITRAGE ASSETS BALANCE OF PAYMENTS BANKING SYSTEM BARTER BLACK MARKET BLACK MARKET EXCHANGE RATE BUSINESS CYCLES CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL GOODS CAPITAL INFLOWS CAPITAL MARKETS CENTRAL BANK CEREAL PRICE CEREAL PRICES CHOW TESTS CLOSED ECONOMY COFFEE PRICES COMMERCIAL BANK COMMERCIAL BANKS COMMERCIALIZATION COMMODITY MARKETS COMMODITY PRICE COMMODITY PRICES COMPETITIVENESS CONSUMER BASKET CONSUMER PRICE CONSUMER PRICE INDEX CONSUMER PRICES CONSUMPTION EXPENDITURE CORRELATION COEFFICIENT CURRENCY DEPRECIATION CURRENCY SUBSTITUTION DEFLATION DEMAND ANALYSIS DEMAND FUNCTION DEPOSIT DEPOSITS DEPRECIATION DEVALUATIONS DISCOUNT RATES DISEQUILIBRIUM DOLLAR EXCHANGE RATE DOMESTIC CURRENCY DOMESTIC DEMAND DOMESTIC GOODS DOMESTIC INFLATION DOMESTIC INVESTORS DOMESTIC MARKET DOMESTIC PRICE DOMESTIC PRICE LEVEL DOMESTIC PRICES DUMMY VARIABLE DUMMY VARIABLES DURABLE GOODS ECONOMETRIC MODEL ECONOMIC GROWTH ENDOGENOUS VARIABLE ENERGY PRICE ENERGY PRICES EQUILIBRIUM LEVEL EQUILIBRIUM PRICES ERROR CORRECTION MODELS ERROR CORRECTION TERM ERROR CORRECTION TERMS EURO EXCHANGE RATE EXCESS DEMAND EXCESS LIQUIDITY EXCESS SUPPLY EXCHANGE RATE EXCHANGE RATE CHANNEL EXCHANGE RATE POLICIES EXCHANGE RATE POLICY EXOGENOUS SHOCK EXPENDITURE EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORT COMPETITIVENESS EXTERNAL FACTORS EXTERNAL MARKETS FACE VALUE FINANCIAL MARKETS FISCAL POLICIES FIXED EXCHANGE RATE FIXED RATE FLOATING EXCHANGE RATE FOOD PRICE FOOD PRICES FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE RATE FOREIGN EXCHANGE RESERVES FOREIGN RESERVES FUTURE INFLATION GDP GROWTH RATE GROWTH RATES HIGH INFLATION IMBALANCES IMPORT IMPORT PRICE IMPORTS INCOME INDEXATION INFLATION INFLATION DYNAMICS INFLATION EXPECTATIONS INFLATIONARY EXPECTATIONS INTEREST RATE INTEREST RATES INTERMEDIATE GOODS INTERMEDIATE PRODUCTS INTERNATIONAL CAPITAL MARKETS INTERNATIONAL MARKET INTERNATIONAL PRICES INTERNATIONAL TRADE INVESTMENT OPPORTUNITIES LOCAL CURRENCY LONG-RUN EQUILIBRIUM LOW INTEREST RATES LOW-INCOME COUNTRIES MACROECONOMIC PERFORMANCE MACROECONOMIC POLICY MARKET CONDITIONS MARKET DISTORTIONS MARKET EQUILIBRIUM MARKET INTEGRATION MARKET PRICES MARKET SHARE MARKET STRUCTURE MARKETING MICROECONOMIC ANALYSIS MONETARY POLICIES MONETARY POLICY MONETARY TRANSMISSION MONEY DEMAND MONEY DEMAND FUNCTION MONEY HOLDINGS MONEY MARKET MONEY MARKETS MONEY STOCK MONEY SUPPLY NATIONAL BANK NOMINAL EXCHANGE RATE OIL PRICE OIL PRICE INFLATION OPEN ECONOMY OUTPUT GAP PARALLEL EXCHANGE RATE PARALLEL MARKET PARALLEL MARKET RATE PHILLIPS CURVE POVERTY REDUCTION PRICE ADJUSTMENTS PRICE CHANGES PRICE DYNAMICS PRICE FLEXIBILITY PRICE FLUCTUATIONS PRICE HIKE PRICE INCREASE PRICE INCREASES PRICE INDEXES PRICE INDICES PRICE INFLATION PRICE LEVEL PRICE LEVELS PRICE SETTING PRICE TRENDS PRODUCER PRICES PUBLIC INVESTMENTS RANDOM WALK RAPID GROWTH RAPID INFLATION RATE OF INFLATION REAL EFFECTIVE EXCHANGE RATE REAL EXCHANGE RATE REAL IMPORTS REAL INTEREST RATE REGIONAL MARKETS RELATIVE PRICE RELATIVE PRICES ROBUSTNESS CHECK STABLE EXCHANGE RATE STRUCTURAL REFORMS SUBSTITUTION SUPPLY SHOCKS SUPPLY-SIDE T-VALUE TIGHT MONETARY POLICY TOTAL EXPORTS TRADABLE GOODS TRADE DEFICITS TRADE PATTERN TRADING PARTNER TRADING PARTNERS TRANSMISSION MECHANISM TRANSMISSION MECHANISMS TRANSPORTATION COSTS TREASURY BILL TREASURY BILLS UNCERTAINTIES UNCERTAINTY UNEMPLOYMENT VOLATILITY WEIGHTS WHOLESALE PRICES WHOLESALERS WORLD MARKET WORLD MARKETS WORLD PRICES 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. 2012-03-19T19:11:03Z 2012-03-19T19:11:03Z 2009-06-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090618133717 http://hdl.handle.net/10986/4163 English Policy Research working paper ; no. WPS 4969 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper Africa Africa Sub-Saharan Africa East Africa Ethiopia |