Money, Meat, and Inflation: Using Price Data to Understand an Export Shock in Sudan, Issues 2002-2084
Sudanese inflation dramatically fell in 2000. But just prior to the sharp decline, an export ban was placed on Sudanese livestock. Motivated by this clue, and in the absence of any reliable income or employment data, this paper systematically develops simultaneous models of the consumer price index (CPI) and the exchange rate to assess the economic impact of the export ban. It finds that livestock exports play a large economic role as an important source of income and as a store of value. In the long run, livestock exports are positively associated with nonfood inflation. In the short run, food price movements are negatively associated with livestock exports: to help smooth income, lower food prices generate increased livestock exports. Therefore, unable to export livestock, farmers may have flooded the local market with meat, lowering food prices. Moreover, the loss of income and the decline in wealth lowered aggregate demand, leading to the decline in nonfood prices.
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aggregate demand autocorrelation from lagsl changes in inflation changes in livestock changes in money Coefficient Std.Error t-value Cointegration Space consumer price index critical value currency decline in food denominated in livestock Econometric economic effect Eigenvalue eigenvector exchange rate movements expected world price export ban food inflation heteroscedasticity using squares increase in livestock inflation rate intertemporal consumption Khartoum lagged livestock export earnings livestock export revenues livestock revenues long run level long run relationship money growth money supply nonfood inflation omitted variable bias overall inflation percent increase period price price of livestock quarters rate of depreciation relationship between money result Seasonal second period short run movements sigma smooth consumption Std.Error t-value t-prob Sudan Sudanese economy t-prob HCSE Table Testing for vector unit elasticity Variable Coefficient Std.Error vector autoregression vector error autocorrelation vector heteroscedasticity Vector normality ChiA2 weakly exogenous