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Understanding the Inflationary Process in the GCC Region: The Case of Saudi Arabia and Kuwait

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Author Info
Maher Hasan
Hesham Alogeel
Abstract

This paper investigates the factors that affect inflation in the GCC region by examining the inflationary processes in Saudi Arabia and Kuwait. The paper utilizes a model that accounts for foreign factors affecting inflation, such as trading partners' inflation and exchange rate pass-through effect, as well as domestic influences. The analysis concludes that, in the long run, higher inflation in trading partners' countries is the main driving force for inflation in the two countries, with significant but lower contributions from the exchange rate pass-through effect and oil prices. Demand and money supply shocks affect inflation in the short run.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/193.

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Length: 37 pages
Date of creation: 06 Aug 2008
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Handle: RePEc:imf:imfwpa:08/193

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Keywords: Inflation ; Saudi Arabia ; Kuwait ; Money supply ; Exchange rate stability ; Bilateral trade ; Cooperation Council for the Arab States of the Gulf ;

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Cited by:
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  1. Hanan Morsy & Magda E. Kandil, 2009. "Determinants of Inflation in GCC," IMF Working Papers 09/82, International Monetary Fund. [Downloadable!]
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