Macroeconomic Determinants of Inflation in Ethiopia: A Time Series Analysis

Résumé

In the last decades, Ethiopia has been one of the fastest growing non-oil producing countries in the world. Along with the economic growth, inflation has been rising. Therefore, the main objective of this study was to identify the major macroeconomic factors affecting inflation in Ethiopia for the year 1981 - 2020. Secondary data were collected from World development indicators database. Both econometrics and descriptive statistics were used for data analysis. The findings of the descriptive result indicated that for forty years the mean official exchange rate was 10.13birr/dollar with standard deviation of 8.6Birr/dollar. The mean inflation rate for Ethiopia was 9.44% with a minimum of -9.81% and a maximum value of 44.39%. Growth of GDP was 5.91% with standard deviation of 6.45%. In order to show long run and short run relationship between variables, vector error correction regression model was applied. Before estimation, stationery test was conducted using dickey fuller test. Inflation rate and growth of GDP were stationary at level while exchange rate and unemployment rate were non-stationary. Therefore, vector error correction model was justifiable. The result of vector error correction model confirmed that there is a significant relationship between devaluation of exchange rate and inflation. Therefore, in order to control inflationary pressure appropriate polices must be designed which compromises unemployment, economic growth and exchange rate regimes.

Citer ce document

Accès au document

Ce document est hébergé sur son dépôt institutionnel d'origine.

Auteur(s)

Statistiques

Consultations : 1

Téléchargements : 0