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Determinants of Recent Inflation in Ethiopia

  • Menji, Sisay

Abstract Inflation has been a rising in Ethiopia during recent years, mainly fueled by food inflation. In the study, an analysis of the determinants of inflation was made using quarterly data during 1997/98 – 2007/08. The research employed Co-integration regression after finding that the variables included in the model were cointegrated. The results from the study depicts that inflation was significantly affected by money supply growth (positively) and domestic output (negatively). Though expected to have a significant effect; fluctuations in the official exchange rate, gas oil price, and budget deficit were found to have an insignificant impact on the inflation rate. Surprisingly though expected to have an insignificant impact, lending rate was found to have a significant impact on the inflation rate. The study concludes with recommendations to avert inflation.

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File URL: http://mpra.ub.uni-muenchen.de/29668/1/MPRA_paper_29668.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29668.

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Date of creation: 31 Aug 2008
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Handle: RePEc:pra:mprapa:29668
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  1. Christopher W. Crowe, 2006. "Inflation, Inequality, and Social Conflict," IMF Working Papers 06/158, International Monetary Fund.
  2. Marc Zelmer & Andrea Schaechter & Mark R. Stone & Alina Carare, 2002. "Establishing Initial Conditions in Support of Inflation Targeting," IMF Working Papers 02/102, International Monetary Fund.
  3. Mark J Flanagan & Felix Hammermann, 2007. "What Explains Persistent Inflation Differentials Across Transition Economies?," IMF Working Papers 07/189, International Monetary Fund.
  4. Catao, Luis A.V. & Terrones, Marco E., 2005. "Fiscal deficits and inflation," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 529-554, April.
  5. repec:imf:imfeci:2 is not listed on IDEAS
  6. Keith M. Carlson, 1980. "The lag from money to prices," Review, Federal Reserve Bank of St. Louis, issue Oct, pages 3-10.
  7. Eva Gutierrez, 2003. "Inflation Performance and Constitutional Central Bank Independence: Evidence From Latin America and the Caribbean," IMF Working Papers 03/53, International Monetary Fund.
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