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Modelling Inflation Shifts and Persistence in Tunisia: Perspective from an Evolutionary spectral approach

  • Zied Ftiti
  • Duc Khuong Nguyen
  • Khaled Guesmi
  • Frédéric Teulon

The main objective of this paper consists to study what we learned about the dynamic of Tunisian inflation rate in the last two decades. This question is overriding concern to monetary policy analysis because it gives us information’s on inflation forecasting. In other words, before given monetary policy recommendations to Tunisian policy makers, after the actual downward of economic indicators and the disarmed of monetary policy consequently of Arabic spring, it is consistent to learn and to know the main characteristics of inflation history in this country. In this work, we suggest studying the specifics of Tunisian inflation dynamic’s on two dimensions. Firstly, we think that is useful to learn the different Tunisian inflation experiences regimes. Then, we try to analysis the nature of Tunisian inflation rate response to shocks; we try to analysis the inflation persistence in order to determine the nature of economy response’s to different chocks. This is the first paper proposing this methodology to analyse monetary policy and there is the first one proposing a measure of inflation persistence. In this work, we contribute to empirical literature of inflation persistence by it proposing a new measure based on the theory of evolutionary co-spectral analysis proposed by Priestley and Tong (1973). The mains findings of this paper show a stable inflation regime around 5.5% in the last ten years. We prove that the Tunisia inflation had a higher degree of inertia which traduce it’s gradually response on shocks. Consequently, we suggest to policy makers to make institutional reforms to reduce inflation.

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Paper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-124.

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Length: 17 pages
Date of creation: 25 Feb 2014
Date of revision:
Handle: RePEc:ipg:wpaper:2014-124
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  1. Essahbi Essaadi & Zied Ftiti, 2008. "The transition period before the inflation targeting policy," Working Papers 0830, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  2. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
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  14. Honda, Yuzo, 2000. "Some tests on the effects of inflation targeting in New Zealand, Canada, and the UK," Economics Letters, Elsevier, vol. 66(1), pages 1-6, January.
  15. Zied Ftiti, 2009. "The Macroeconomic Performance of the Inflation Targeting Policy: An Approach Based on the Evolutionary Co-spectral Analysis," Working Papers 0918, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  16. Chan Guk Huh, 1996. "Some evidence on the efficacy of the UK inflation targeting regime: an out-of-sample forecast approach," International Finance Discussion Papers 565, Board of Governors of the Federal Reserve System (U.S.).
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