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Inflation Dynamics in Tunisia: a Smooth Transition Autoregressive Approach

Author

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  • Wissem Boukraine

    (University of Tunis El Manar, Faculty of Economic Science and Management of Tunis, Tunis, Tunisia)

Abstract

The aim of this paper is to assess the effectiveness of the Tunisian monetary reforms. We use a smooth transition autoregressive model STAR in order to analyze inflation dynamics in Tunisia, based on the evolutions of its persistence and its volatility, on monthly data from 1990 to 2020. We distinguish three sub-periods based on two monetary reforms: the declaration of price stability as the central bank first priority in 2006 and the adoption of a proactive monetary policy aimed at anticipating inflation in 2011. The main findings suggest that the ESTAR specification describes better the behavior of inflation, it also show changes in the persistence and important shifts in volatility reinforcing the effectiveness of the monetary reforms despites political instability and the democratic transition in Tunisia. But still, more reforms are required for a fully commitment to a specific inflation target, as it will reinforce the Tunisian central bank credibility.

Suggested Citation

  • Wissem Boukraine, 2020. "Inflation Dynamics in Tunisia: a Smooth Transition Autoregressive Approach," Economic Research Guardian, Mutascu Publishing, vol. 10(2), pages 122-143, December.
    • Handle: RePEc:wei:journl:v:10:y:2020:i:2:p:122-143
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    References listed on IDEAS

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    1. Thouraya Boujelbène Dammak & Kamel Helali, 2016. "A Nonlinear Approach to Tunisian Inflation Rate," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 19(61), pages 147-164, September.
    2. Amano, Robert, 2007. "Inflation persistence and monetary policy: A simple result," Economics Letters, Elsevier, vol. 94(1), pages 26-31, January.
    3. Michael Bleaney, 2001. "Exchange Rate Regimes and Inflation Persistence," IMF Staff Papers, Palgrave Macmillan, vol. 47(3), pages 1-5.
    4. Thouraya Boujelbène Dammak & Kamel Helali, 2017. "Threshold Effects on the Relationship Between Inflation Rate and Economic Growth in Tunisia," International Economic Journal, Taylor & Francis Journals, vol. 31(2), pages 310-325, April.
    5. Khoutem Ben Jedidia & Thouraya Boujelbene Dammak & Helali Kamel, 2019. "Trade-threshold Effect on Inflation in Tunisia: New Evidence Resulting from a Nonlinear Approach," International Economic Journal, Taylor & Francis Journals, vol. 33(1), pages 149-169, January.
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    Cited by:

    1. Boukraine, Wissem & Guerchi Mehri, Hella, 2022. "Should Tunisian Optimal Monetary Policy React to Wage Inflation? Evidence From A DSGE Model with Labor Market Frictions," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 75(1), pages 29-50.

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    More about this item

    Keywords

    Inflation; persistence; volatility; Smooth Transition Autoregressive; Tunisia;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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