Understanding Inflation Dynamics In Afghanistan
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Understanding Inflation Dynamics in Afghanistan
Author: Karim Badr
language: en
Publisher: International Monetary Fund
Release Date: 2025-07-04
Over the past two decades, Afghanistan experienced three main periods of deflation, with the lastest being the longest. This paper investigates the macroeconomic factors influencing inflation dynamics in the short and long run, considering both domestic and external factors. Utilizing quarterly data and employing Autoregressive Distributed Lag (ARDL) and Error Correction Model (ECM) methodologies, the paper finds that the exchange rate is the primary long-term price driver due to Afghanistan's reliance on imports and foreign aid, followed by money supply and international commodity prices. In the short run, inflation is persisent, and broad money have a significant impact on inflation compared to external factors.
Oil Prices and Inflation Dynamics: Evidence from Advanced and Developing Economies
Author: Sangyup Choi
language: en
Publisher: International Monetary Fund
Release Date: 2017-09-05
We study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015. We find that a 10 percent increase in global oil inflation increases, on average, domestic inflation by about 0.4 percentage point on impact, with the effect vanishing after two years and being similar between advanced and developing economies. We also find that the effect is asymmetric, with positive oil price shocks having a larger effect than negative ones. The impact of oil price shocks, however, has declined over time due in large part to a better conduct of monetary policy. We further examine the transmission channels of oil price shocks on domestic inflation during the recent decades, by making use of a monthly dataset from 2000 to 2015. The results suggest that the share of transport in the CPI basket and energy subsidies are the most robust factors in explaining cross-country variations in the effects of oil price shocks during the this period.
Aid Paradoxes in Afghanistan
The relationship between aid and state building is highly complex and the effects of aid on weak states depend on donors’ interests, aid modalities and the recipient’s pre-existing institutional and socio-political conditions. This book argues that, in the case of Afghanistan, the country inherited conditions that were not favourable for effective state building. Although some of the problems that emerged in the post-2001 state building process were predictable, the types of interventions that occurred—including an aid architecture which largely bypassed the state, the subordination of state building to the war on terror, and the short horizon policy choices of donors and the Afghan government—reduced the effectiveness of the aid and undermined effective state building. By examining how foreign aid affected state building in Afghanistan since the US militarily intervened in Afghanistan in late 2001 until the end of President Hamid Karzai’s first term in 2009, this book reveals the dynamic and complex relations between the Afghan government and foreign donors in their efforts to rebuild state institutions. The work explores three key areas: how donors supported government reforms to improve the taxation system, how government reorganized the state’s fiscal management system, and how aid dependency and aid distribution outside the government budget affected interactions between state and society. Given that external revenue in the form of tribute, subsidies and aid has shaped the characteristics of the state in Afghanistan since the mid-eighteenth century, this book situates state building in a historical context. This book will be invaluable for practitioners and anyone studying political economy, state building, international development and the politics of foreign aid.