Short and long-run determinants of inflation in Tunisia

The depreciation of the national currency, the higher wage costs passed on to prices and the growing external debt, has characterized the Tunisian economy for almost a decade. In this context we investigate its inflation dynamics to understand which variables affects it in the short and the long run. We apply the Autoregressive Distributed-lagged model over quarterly data from 2010 to 2019 alongside the bound testing approach. Our results suggest a significant impact of external debt and loans on inflation in the short and long run, while GDP growth affects inflation only in the long run.