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Core Inflation Measure and Its Effect on Economic Growth and Employment in Tunisia

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  • Maha Kalai
  • Thouraya Boujelbene Dammak

Abstract

The aim of this study is to present a measure for the core inflation in Tunisia. This measure consists in a six-variable structural vector autoregression model covering the period 1975Q1-2014Q4. Our results show that the observed inflation rate exceeds the core inflation when demand rises and conversely when there is a low growth. This seems to be reasonable as core inflation has a deterministic tendency and, therefore, the monetary impulse largely accounts for the evolution of inflation. Our findings also support the idea that there is a weak positive correlation between the inflation rate and the industrial production index in the short run. This core inflation is also observed to have a weak effect on unemployment over the short and long runs. Thus, this type of inflation should be taken into account as an important element for the determination of a targeted inflation rate and for future predictions and decisions of the monetary authorities.

Suggested Citation

  • Maha Kalai & Thouraya Boujelbene Dammak, 2017. "Core Inflation Measure and Its Effect on Economic Growth and Employment in Tunisia," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 20(66), pages 153-179, December.
    • Handle: RePEc:rej:journl:v:20:y:2017:i:66:p:153-179
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    More about this item

    Keywords

    Core Inflation; Exogenous and Endogenous Chocks; Economic Growth; Employment; Structural VAR; Tunisia.;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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