Macro-economic Determinants of Recent Inflation in Ethiopia

Tadesse Wudu Abate

doi:doi:10.11648/j.jwer.20200902.17

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Macro-economic Determinants of Recent Inflation in Ethiopia

Tadesse Wudu Abate

Published in Journal of World Economic Research (Volume 9, Issue 2)

Received: 9 October 2020 Accepted: 23 October 2020 Published: 19 November 2020

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Abstract

Expansion is one of the major macro-economic issues which determine the better functioning of the economy. Additionally, it leads a multi-dimensional effect on the overall social, economic, financial, mechanical and political affairs of the country. To come with this problem, the study focuses on the identification and assessment of variables which determine the rate of inflation in Ethiopia using annual data from the year 1985 to 2018. The study used secondary time series data and applies econometric analysis to identify significant variables in determining inflation both in the long run and short run and descriptive methods of data analysis to identify the trend of inflation and money supply. The finding of this study shows that real interest rate and real effective exchange rate are significant in determining inflation both in the short run and long run. Broad money supply determines inflation only in the long run and gross domestic saving doesn’t determine the rate of inflation both in the long run and short run. The monetary base of the country which is broad money supply has some dispersion or different impact in determining inflation. It has significant impact in the long run but became statistically insignificant in the short run since monetary policy has higher outside lag and needs longer time to affect inflation after increasing money supply. So it is advisable to the policy makers to find the right balances whether money supply permanently determines inflation rate or it is insignificance in both short run and long run models.

Published in	Journal of World Economic Research (Volume 9, Issue 2)
DOI	10.11648/j.jwer.20200902.17
Page(s)	126-132
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Ethiopia, Inflation, Money Supply, Multiple Regression

References

[1]	Alemayehu G (2011). The basic determinants of inflation in the case of least developed countries, working paper in African journal under IMF supervision, page no 45.
[2]	Beletelhem G (2012). Determinants inflation: the case of Ethiopia, thesis in the fulfillment of MSc degree from Addis Ababa University.
[3]	Dejan, K (2007). Short Term Inflation Projections for Slovenia, Comparing Factor Models with AR and VAR models. journal of economics and sustainable development v.6.
[4]	Demandor N Gujarati (2004). basic econometrics, 4^th edition, page no 325, Mc Grow Hill international, New York.
[5]	Habtamu D (2000). The cause of low inflation in Ethiopia, M. A Thesis, Addis Ababa University, page no 10.
[6]	Kibrom T (2008). The Sources of the Recent Inflationary Experience in Ethiopia, Addis Ababa University, Department of Economics, Unpublished MSc Thesis.
[7]	Kenny A (2013). What determines inflation in Kazakhstan, 5^th edition, page no 345- 347.
[8]	Kibritioglu K (2012). Recent inflationary trend in OPEC countries and its immediate determinants page no 89.
[9]	Mishkin F. J (1997). the determinants of inflation in Nigeria, IMF staff members, page no 24.
[10]	MoFEC (2010). National Economic Accounts Directorate. Ministry of Finance and Economic Development, November 2010, Addis Ababa.
[11]	Muche K (2007). Recent trend of inflation and its main determinants the case of Ethiopia. Working paper in economics. 14-16
[12]	Case of Ethiopia. Working paper in Economics, No 347.
[13]	Semmu G (2003). Why inflation is continuously rising in Ethiopia, The case of food price, Haromaya university M. A thesis.
[14]	Sisay M (2008). Determinant of recent inflation on Ethiopia, Unity University, MA Thesis 34-45.
[15]	Taddele F (2008). Forecasting model of Inflationary process in Ethiopia. Addis Ababa University, Department of Statistics, Unpublished M.sc Thesis.
[16]	Yohannes A (2009). Inflation Dynamics and Food Prices in Agricultural Economy: The journal of economics and sustainable development. V.11 page 34.

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Tadesse Wudu Abate. (2020). Macro-economic Determinants of Recent Inflation in Ethiopia. Journal of World Economic Research, 9(2), 126-132. https://doi.org/10.11648/j.jwer.20200902.17

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Tadesse Wudu Abate. Macro-economic Determinants of Recent Inflation in Ethiopia. J. World Econ. Res. 2020, 9(2), 126-132. doi: 10.11648/j.jwer.20200902.17

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Tadesse Wudu Abate. Macro-economic Determinants of Recent Inflation in Ethiopia. J World Econ Res. 2020;9(2):126-132. doi: 10.11648/j.jwer.20200902.17

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@article{10.11648/j.jwer.20200902.17,
  author = {Tadesse Wudu Abate},
  title = {Macro-economic Determinants of Recent Inflation in Ethiopia},
  journal = {Journal of World Economic Research},
  volume = {9},
  number = {2},
  pages = {126-132},
  doi = {10.11648/j.jwer.20200902.17},
  url = {https://doi.org/10.11648/j.jwer.20200902.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20200902.17},
  abstract = {Expansion is one of the major macro-economic issues which determine the better functioning of the economy. Additionally, it leads a multi-dimensional effect on the overall social, economic, financial, mechanical and political affairs of the country. To come with this problem, the study focuses on the identification and assessment of variables which determine the rate of inflation in Ethiopia using annual data from the year 1985 to 2018. The study used secondary time series data and applies econometric analysis to identify significant variables in determining inflation both in the long run and short run and descriptive methods of data analysis to identify the trend of inflation and money supply. The finding of this study shows that real interest rate and real effective exchange rate are significant in determining inflation both in the short run and long run. Broad money supply determines inflation only in the long run and gross domestic saving doesn’t determine the rate of inflation both in the long run and short run. The monetary base of the country which is broad money supply has some dispersion or different impact in determining inflation. It has significant impact in the long run but became statistically insignificant in the short run since monetary policy has higher outside lag and needs longer time to affect inflation after increasing money supply. So it is advisable to the policy makers to find the right balances whether money supply permanently determines inflation rate or it is insignificance in both short run and long run models.},
 year = {2020}
}

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TY  - JOUR
T1  - Macro-economic Determinants of Recent Inflation in Ethiopia
AU  - Tadesse Wudu Abate
Y1  - 2020/11/19
PY  - 2020
N1  - https://doi.org/10.11648/j.jwer.20200902.17
DO  - 10.11648/j.jwer.20200902.17
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 126
EP  - 132
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20200902.17
AB  - Expansion is one of the major macro-economic issues which determine the better functioning of the economy. Additionally, it leads a multi-dimensional effect on the overall social, economic, financial, mechanical and political affairs of the country. To come with this problem, the study focuses on the identification and assessment of variables which determine the rate of inflation in Ethiopia using annual data from the year 1985 to 2018. The study used secondary time series data and applies econometric analysis to identify significant variables in determining inflation both in the long run and short run and descriptive methods of data analysis to identify the trend of inflation and money supply. The finding of this study shows that real interest rate and real effective exchange rate are significant in determining inflation both in the short run and long run. Broad money supply determines inflation only in the long run and gross domestic saving doesn’t determine the rate of inflation both in the long run and short run. The monetary base of the country which is broad money supply has some dispersion or different impact in determining inflation. It has significant impact in the long run but became statistically insignificant in the short run since monetary policy has higher outside lag and needs longer time to affect inflation after increasing money supply. So it is advisable to the policy makers to find the right balances whether money supply permanently determines inflation rate or it is insignificance in both short run and long run models.
VL  - 9
IS  - 2
ER  -

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Author Information

Tadesse Wudu Abate

Department of Economics, Faculty of Business and Economics, Woldia University, Woldia, Ethiopia

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APA Style

Tadesse Wudu Abate. (2020). Macro-economic Determinants of Recent Inflation in Ethiopia. Journal of World Economic Research, 9(2), 126-132. https://doi.org/10.11648/j.jwer.20200902.17

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ACS Style

Tadesse Wudu Abate. Macro-economic Determinants of Recent Inflation in Ethiopia. J. World Econ. Res. 2020, 9(2), 126-132. doi: 10.11648/j.jwer.20200902.17

Copy | Download

AMA Style

Tadesse Wudu Abate. Macro-economic Determinants of Recent Inflation in Ethiopia. J World Econ Res. 2020;9(2):126-132. doi: 10.11648/j.jwer.20200902.17

Copy | Download

@article{10.11648/j.jwer.20200902.17,
  author = {Tadesse Wudu Abate},
  title = {Macro-economic Determinants of Recent Inflation in Ethiopia},
  journal = {Journal of World Economic Research},
  volume = {9},
  number = {2},
  pages = {126-132},
  doi = {10.11648/j.jwer.20200902.17},
  url = {https://doi.org/10.11648/j.jwer.20200902.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20200902.17},
  abstract = {Expansion is one of the major macro-economic issues which determine the better functioning of the economy. Additionally, it leads a multi-dimensional effect on the overall social, economic, financial, mechanical and political affairs of the country. To come with this problem, the study focuses on the identification and assessment of variables which determine the rate of inflation in Ethiopia using annual data from the year 1985 to 2018. The study used secondary time series data and applies econometric analysis to identify significant variables in determining inflation both in the long run and short run and descriptive methods of data analysis to identify the trend of inflation and money supply. The finding of this study shows that real interest rate and real effective exchange rate are significant in determining inflation both in the short run and long run. Broad money supply determines inflation only in the long run and gross domestic saving doesn’t determine the rate of inflation both in the long run and short run. The monetary base of the country which is broad money supply has some dispersion or different impact in determining inflation. It has significant impact in the long run but became statistically insignificant in the short run since monetary policy has higher outside lag and needs longer time to affect inflation after increasing money supply. So it is advisable to the policy makers to find the right balances whether money supply permanently determines inflation rate or it is insignificance in both short run and long run models.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Macro-economic Determinants of Recent Inflation in Ethiopia
AU  - Tadesse Wudu Abate
Y1  - 2020/11/19
PY  - 2020
N1  - https://doi.org/10.11648/j.jwer.20200902.17
DO  - 10.11648/j.jwer.20200902.17
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 126
EP  - 132
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20200902.17
AB  - Expansion is one of the major macro-economic issues which determine the better functioning of the economy. Additionally, it leads a multi-dimensional effect on the overall social, economic, financial, mechanical and political affairs of the country. To come with this problem, the study focuses on the identification and assessment of variables which determine the rate of inflation in Ethiopia using annual data from the year 1985 to 2018. The study used secondary time series data and applies econometric analysis to identify significant variables in determining inflation both in the long run and short run and descriptive methods of data analysis to identify the trend of inflation and money supply. The finding of this study shows that real interest rate and real effective exchange rate are significant in determining inflation both in the short run and long run. Broad money supply determines inflation only in the long run and gross domestic saving doesn’t determine the rate of inflation both in the long run and short run. The monetary base of the country which is broad money supply has some dispersion or different impact in determining inflation. It has significant impact in the long run but became statistically insignificant in the short run since monetary policy has higher outside lag and needs longer time to affect inflation after increasing money supply. So it is advisable to the policy makers to find the right balances whether money supply permanently determines inflation rate or it is insignificance in both short run and long run models.
VL  - 9
IS  - 2
ER  -

Copy | Download