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Determinants of Inflation in Sierra Leone

Author

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  • Jackson, Emerson Abraham
  • Kamara, Purity
  • Kamara, Abdulsalam

Abstract

This paper examines the determinants of inflation in Sierra Leone using monthly time series data from 2010M1 to 2021M12, with the application of the ARDL model. The emphasis of the empirical study as outlined in the objectives is to examine both supply-side and demand-side pressure as observed in the outcome of the short and long-run relationships. Taking into account the characteristics of the Sierra Leonean economy, which is also backed by recent studies on inflation dynamics, the constructed ARDL model emphasizes the effects of the exchange rate, RGDP, Fiscal Balance (FBAL), Currency in Circulation, and Lending Rate (LR) factors on inflation dynamics in the economy. The empirical results show that in the long-run, the main determinants of inflation in Sierra Leone are the exchange rate, Real Gross Domestic Product (RGDP), Fiscal Balance, Currency in Circulation, and Lending Rate. In the short run, all the variables except RGDP and Exchange Rate manifested significant effects on inflation dynamics. Finally, the error correction term (-0.063) was proven to be negative and statistically significant, thereby suggesting the rapid rate of adjustment to its long-run state

Suggested Citation

  • Jackson, Emerson Abraham & Kamara, Purity & Kamara, Abdulsalam, 2022. "Determinants of Inflation in Sierra Leone," MPRA Paper 117278, University Library of Munich, Germany, revised Apr 2023.
    • Handle: RePEc:pra:mprapa:117278
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    References listed on IDEAS

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    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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    Cited by:

    1. Jackson, Emerson Abraham, 2024. "Economic Theory of Inflation," EconStor Preprints 280999, ZBW - Leibniz Information Centre for Economics.

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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