DEBT, ECONOMIC GROWTH AND INFLATION IN TUNISIA

Abstract

The depreciation of the national currency, the slow economic growth, the higher wage costs passed on to prices and the growing external debt, characterized the Tunisian economy in the last decade. In this context we investigate its inflation dynamics to understand which variables affects it in the short and in 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 economic growth affects inflation only in the long run.