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Analysis Of The Non-Linear Effects Of The Volatile Exchange Rate On Inflation In The Democratic Republic Of Congo From 1970 To 2022
[Analyse Des Effets Non-Lineaires De La Volatilite Du Taux De Change Sur L'Inflation En Republique Democratique Du Congo De 1970 À 2022]

Author

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  • Ally Manengu Manengu

    (UNIKIN - Département des Sciences économiques, Université de Kinshasa)

Abstract

This study takes part in the debate about nature of the relationship between exchange rate fluctuations and inflation. The goal is to demonstrate that the exchange rate evolves in a volatile manner, and that its effects on inflation are positive and non-linear for the case of the Democratic Republic of Congo (DRC), with annual data for the period from 1970 to 2022. Two econometric models are fitted for this purpose : (i) the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model, which was developed by Robert Engle, F., (1986); (ii) the Nonlinear Staggered Lag Autoregressive (NARDL) model, which was developed by Shin, Y.; Yu, B. C., and Greenwood-Nimmo, M. (2014). The results obtained from the estimations attest to the following : (i) the exchange rate in the DRC evolves in a volatile manner ; (ii) in the short term, the effects of exchange rate volatility on inflation are positive and non-linear, while they are linear in the long term. Positive shocks have an inflationary effect ; while negative shocks have a negative and statistically insignificant effect (prices are rigid to exchange rate depreciation in the DRC).

Suggested Citation

  • Ally Manengu Manengu, 2025. "Analysis Of The Non-Linear Effects Of The Volatile Exchange Rate On Inflation In The Democratic Republic Of Congo From 1970 To 2022 [Analyse Des Effets Non-Lineaires De La Volatilite Du Taux De Cha," Post-Print hal-05083768, HAL.
    • Handle: RePEc:hal:journl:hal-05083768
    Note: View the original document on HAL open archive server: https://hal.science/hal-05083768v1
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    Keywords

    Taux de change Inflation volatilité et GARCH effets non-linéaires et NARDL. Classification JEL : E31 F41 E44 et C52 C53 C22 Exchange rate Inflation volatility and GARCH non-linear effects and NARDL. JEL code : E31 F41 E44 and C52 C53 C22; Taux de change; Inflation; volatilité et GARCH; effets non-linéaires et NARDL. Classification JEL : E31; F41; E44 et C52; C53; C22 Exchange rate; volatility and GARCH; non-linear effects and NARDL. JEL code : E31; E44 and C52; C22;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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