One of the ongoing policy issues confronting monetary authorities around the world is the management of a stable price environment. Unstable prices create uncertainty, lower investment, and raise costs of doing business, thus lowering rates of growth. As a result, there exists a widespread need for understanding inflationary dynamics in any country of interest. This paper develops a standard monetary inflation model and augments it to include import, labor, energy, and intermediate goods and materials cost of production factors in a theoretically plausible manner. Implications for implementing an empirical version of the model are also discussed with a view toward the various econometric difficulties that may surface in estimation
