The sources of inflation in Qatar : an empirical study (1980-2010)‎

Abstract EN

The main objective of this Study is to determine the sources of inflation in Qatar.

For achieving this objective a single-equation model of inflation in Qatar is specified and estimated.

This model is based on the monetarist single-equation model of inflation.

However, the model departs from the monetarist single-equation model of inflation by including the external factors that are expected to have impact on inflation in Qatar namely; the U.S.

Dollar short-term market interest rate, world inflation and the movements of Qatari Riyal exchange rate against the major international currencies.

The empirical outcomes that emerge from estimating our single-equation model of inflation in Qatar indicate that all the explanatory variables bear the correct sign.

Yet all the explanatory variables are found to be statistically significant, except the nominal effective Qatari Riyal exchange rate index which represents the Riyal exchange rate against the major international currencies.

The overall fit of the regression is very good (see the estimated equation #2) with four explanatory variables explaining large proportion of the total variations of inflation rate in Qatar (R2=0.735).

Moreover, four explanatory variables are found to exert strong impact on the inflation in Qatar, namely, the growth of money supply, the growth of real income, the changes in U.S Dollar market interest rate and the inflation rate in advanced economies.

One of the main conclusions of this study is that the inflation in Qatar can be considered as a monetary and structural phenomenon.

This suggests that a serious antiinflation monetary policy should include a reduction in the rate of monetary growth.