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The Relationship between Inflation, Exchange Rate, Money Supply and Economic Growth in The Gambia

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  • Amadou Jawo

    (University of The Gambia.)

  • Mohammed Jebou

    (University of The Gambia.)

  • Lamin Fatou Bayo

    (University of The Gambia.)

Abstract

Instability in the movement of prices is a major concern in all countries. The rise in foreign exchange and prices of goods and services are among the key factors that causes fluctuation in the economic growth of a country. Thus, this paper adopted the ARDL model to examine whether real effective exchange rate, economic growth and money supply causes Inflation in the Gambia for the period 1985 to 2021. The finding reveals that all our variables causes inflation positively and negatively in the long run and short run respectively at a significant level of 1% except real effective exchange rate and money supply which is significant at 5% level in the long run. The recursive cumulative sum shows that the relationship was stable and the square recursive cumulative sum reveals instability in the relationship of our dependent and independent variables which could be as a result of exogenous shock in output and increase amount of public debts. The study recommends the Gambian government to be caution in taking increase amount of public debts and also the central bank of the Gambia to move from monetary targeting to inflation targeting so as to maintain economic growth and price stability. However, the central bank of the Gambia should assess the entire economy before implementing the policy.

Suggested Citation

  • Amadou Jawo & Mohammed Jebou & Lamin Fatou Bayo, 2023. "The Relationship between Inflation, Exchange Rate, Money Supply and Economic Growth in The Gambia," Technium Social Sciences Journal, Technium Science, vol. 40(1), pages 213-222, February.
  • Handle: RePEc:tec:journl:v:40:y:2023:i:1:p:213-222
    DOI: 10.47577/tssj.v40i1.8267
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    References listed on IDEAS

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    1. Petreski, Marjan, 2009. "Exchange-rate regime and economic growth: a review of the theoretical and empirical literature," Economics Discussion Papers 2009-31, Kiel Institute for the World Economy (IfW Kiel).
    2. T.O. Akinbobola, 2012. "The dynamics of money supply, exchange rate and inflation in Nigeria," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(4), pages 1-8.
    3. Reda Abonazel, Mohamed & Elnabawy, Nourhan, 2020. "Using the ARDL bound testing approach to study the inflation rate in Egypt," Economic Consultant, Roman I. Ostapenko, vol. 31(3), pages 24-41.
    4. Ozturk, 2006. "Exchange Rate Volatility and Trade: A Literature Survey," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 3(1), pages 85-102.
    5. J.O. Adeniran & S.A. Yusuf & Olatoke A. Adeyemi, 2014. "The Impact of Exchange Rate Fluctuation on the Nigerian Economic Growth: An Empirical Investigation," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(8), pages 224-233, August.
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    Cited by:

    1. Cham, Yaya, 2023. "Financial Globalization and Bank Lending: The Limits of Domestic Monetary Policy in The Gambia," MPRA Paper 117026, University Library of Munich, Germany.

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    More about this item

    Keywords

    Inflation; Real effective exchange rate; Money Supply;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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