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Macroeconomic Dynamics and Growth in The Gambia: Evidence from Cointegration and Granger Causality Analyses

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  • Cheng-Wen Lee
  • Patrick A Mendy
  • Makaireh Dampha
  • Augustine Sanyang

Abstract

This study employs time series econometric techniques to examine the dynamic relationship among economic growth, money supply, exchange rate and inflation in The Gambia over the period 1966 to 2023. The empirical findings reveal the existence of a long-run equilibrium relationship among the variables, with money supply exerting a significant positive influence on economic growth. Granger causality tests indicate a unidirectional causality running from real GDP to the exchange rate, while inflation does not exhibit any significant causal linkage with the other variables. The Vector Error Correction Model (VECM) further underscores the pivotal role of money supply in driving long-term growth, highlighting the importance of prudent monetary policy and exchange rate stability for sustainable economic development. Additionally, the analysis reveals that the trends in the time series data are consistent with the statistical results in which money supply and economic growth are positively correlated in the long run, whereas exchange rate depreciation tends to fuel inflation. These findings underscore the critical importance of maintaining currency stability to support The Gambia’s macroeconomic performance.  JEL classification numbers: E51; E31; F31; O47; C32; F43.

Suggested Citation

  • Cheng-Wen Lee & Patrick A Mendy & Makaireh Dampha & Augustine Sanyang, 2025. "Macroeconomic Dynamics and Growth in The Gambia: Evidence from Cointegration and Granger Causality Analyses," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 15(4), pages 1-4.
    • Handle: RePEc:spt:admaec:v:15:y:2025:i:4:f:15_4_4
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    Keywords

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    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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