Money, inflation and the Arab Spring in Bahrain

This paper investigates inflation in Bahrain during the period of the Arab Spring to determine effect of unrest on general and relative prices. We find first that the GDP deflator alone measures inflation in Bahrain; the CPI measures the cost of living only. Additionally, oil prices, the U.S. dollar's trade-weighted value, and government price intervention are highly correlated with price movements. Disaggregated monthly CPI data reveal the onset of unrest is correlated with movements in several components of the CPI index, but the Arab Spring had its most direct and lasting causal effect solely on the housing.