Saudi Arabia's Inflation Agenda: A Vector Autoregressive Framework

Abstract

Due to the aftermath of global financial crisis and emerging recovery, the issue of inflation is one to be considered extremely important in the next few years of expansion. Thisstudy carries out multi-step ahead forecasts of major variables like changes in food and beverages, changes in global inflation, changes in US dollar trade weighted index, and changes inhousing availability on inflation by using a Vector Autoregressive (VAR) framework. Findings suggest an improvement in forecasting changes in inflation, and also that limited housing supply remains a major cause of inflation in Saudi Arabia.