Determinants of inflation in CEMAC: the role of money

The aim of this study is to investigate the causes of inflation in CEMAC, with a particular attention to the monetary dimension. Using a Panel Vector Autoregressive (PVAR) approach on CEMAC countries and data from 1990 to 2014, we show that money supply and imported inflation are the two main sources of inflation in CEMAC countries. These factors seem to explain inflation better than oil prices, budget balance and output gap. Specifically, the results show that money supply causes about 24% of inflation’s variation while imported inflation explains about 6% of inflation’s fluctuations. However, an important inflation’s inertia is observed (64% in mean), enlightening some structural problems, in particular, the slowness of expectations adjustment of agents in CEMAC