Advanced Search
MyIDEAS: Login to save this paper or follow this series

Dynamics of inflationary processes in Malawi

Contents:

Author Info

  • Kisu Simwaka

    (Reserve Bank of Malawi)

Registered author(s):

    Abstract

    DYNAMICS OF INFLATIONARY PROCESSES IN MALAWI: AN ECONOMETRIC ANALYSIS* Kisu Simwaka Research & Statistics Department Reserve Bank of Malawi The paper investigates the sources of inflationary pressures in Malawi and suggests ways of mitigating such pressures. In the first part of the study, we test for unit root test to determine the order of integration of the variables. A model of inflation is estimated as a co-integrating vector that spans nominal exchange rate and domestic output. In the second stage, a model of inflation is estimated with first differences of the non-stationary variables, a level variable and the co-integrating vector. Results indicate that inflation in Malawi is a result of both real and monetary shocks to the economy. It is further observed that current slumps in production generate inflationary pressures. This is due to the fact that food, a perishable product, exerts an immediate impact on inflation. Measures to control inflation must therefore emphasize enhancing production and supply, especially food. It is also imperative that efforts be made to improve distribution and road networks to reduce costs. It is worthy to note that although a lot of efforts have been made to curb domestic credit expansion, capital inflows are not usually taken into account and yet they constitute a major source of liquidity injection. Without proper measures including sterilization, the problem will continue to plague the nation. Monetary expansion will need to be controlled through more disciplined financial management to counteract these externally generated liquidity injections. It must also be noted that exchange rate adjustments fuel cost-push inflation. Thus the inflationary problem in Malawi is a multifaceted issue with many causes. Inflationary control should aim at policies directed at both real and monetary factors. Keywords : Inflation; Co-integration, Vector Autoregression *The findings, interpretation and conclusions expressed in this paper are entirely those of the author. They don’t necessarily represent the views of the Reserve Bank of Malawi.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://128.118.178.162/eps/mac/papers/0407/0407016.pdf
    Download Restriction: no

    File URL: http://128.118.178.162/eps/mac/papers/0407/0407016.ps.gz
    Download Restriction: no

    File URL: http://128.118.178.162/eps/mac/papers/0407/0407016.doc.gz
    Download Restriction: no

    Bibliographic Info

    Paper provided by EconWPA in its series Macroeconomics with number 0407016.

    as in new window
    Length:
    Date of creation: 16 Jul 2004
    Date of revision:
    Handle: RePEc:wpa:wuwpma:0407016

    Note: Type of Document - txt
    Contact details of provider:
    Web page: http://128.118.178.162

    Related research

    Keywords: Inflation; Co-integration; Vector Autoregression;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    2. Argy, Victor, 1970. "Structural Inflation in Developing Countries," Oxford Economic Papers, Oxford University Press, vol. 22(1), pages 73-85, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0407016. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.