Pass-through of world prices to domestic inflation in Mauritania: an analysis of the asymmetric transmission of food, energy and exchange-rate shocks (2005-2024)

Abstract

This paper analyses the pass-through of world prices to domestic inflation in Mauritania over the period 2005-2024, in an economy heavily dependent on food and energy imports. While the pass-through is extensively documented for industrialised economies and, more recently, for several developing economies, it remains largely unexplored for Mauritania and, more broadly, for the small open net-importing economies of the sub-region; this paper fills that gap. The research question is twofold. First, it aims to measure the magnitude and speed of the transmission of international price shocks (food, energy) and exchange-rate movements to consumer prices. Second, it seeks to determine whether this transmission is asymmetric, that is, whether domestic prices react faster and more strongly to increases than to decreases in world prices, a phenomenon known in the literature as "rockets and feathers". Methodologically, the study relies on a Nonlinear Autoregressive Distributed Lag (NARDL) model estimated on monthly series covering the 2005-2024 period, that is, 240 observations for the aggregate series and 204 for the imported/local breakdown. The model decomposes each explanatory variable into cumulated positive and negative changes and thus makes it possible to estimate separately the pass-through of increases and decreases. It is complemented by an error-correction representation capturing short- and long-run dynamics, by the bounds cointegration test and by Wald asymmetry tests. The ANSADE distinction between imported-goods inflation and locally-produced-goods inflation allows a sharp identification of the imported channel. The results point to an incomplete but significant pass-through, faster for energy than for food, as well as to an upward asymmetry. These conclusions have direct implications for the conduct of monetary policy and for household purchasing-power protection schemes.

JEL Classification: E31; F31; Q11; C22; O55.

Paper type: Empirical Research.