Does a Symmetric Relationship Exist Between Inflation and Imported Inflation? Empirical Evidence from Saudi Arabia

Abstract

This study aims at examining the nature of the relationship between inflation represented by the relative change in the consumer price index and imported inflation represented by the relative change in import prices in Saudi Arabia. The study uses data for the period 2000-2017. From an econometric perspective, the nonlinear autoregressive distributed lag (NARDL) is used. The results of the unit root tests shows that all the variables have a unit root except for the money supply. It also shows that there is a structural breakpoint in inflation and imported inflation in 2006 Q3 and 2012 Q3, respectively. The results shows a direct correlation between imported inflation and general inflation using ARDL and a 0.3066 elasticity coefficient, also shows an asymmetric relationship using NARDL in the long term and in the short term Between the two variables.