Determinants of inflation in developing countries. Determinant of Inflation in West African: Nigeria and others. EduCacInfo 2019-01-08

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Studies of Inflation in Developing Countries

determinants of inflation in developing countries

Results also show that there is a strong correlation between the terms of trade and inflation, which says that trade openness increases the demand for imported goods and, therefore, causes more inflation for Tunisia. Such structural rigidities includes currency depreciation, population growth, over dependency on imported goods, institutional framework, corruption, supply bottle neck, oil price, fall in export earnings, poor agriculture harvest among others. Time Varying Parameters of Inflation in Nepal: A State Space Modelling. Our paper investigates the effect of remittance inflows on trade balance with a sample including 17 countries in the Asia-Pacific region in the period 1980-2015, which now is the largest recipient group compares others but there is no study in the region-level. They concluded that in the long run, population growth and service output affect inflation positively while foreign direct investment, foreign aid and agricultural output impact negatively. In both countries money supply and per capita income has negative relationship with consumer price index this was contrary with the apriori expectation for money supply.

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Analysis of the Determinants of Inflation in Nepal

determinants of inflation in developing countries

The major factors affecting inflation in Iran, over the long run, are internal rather than external. This relationship was demonstrated again in 2008-2009 when the oil price in the international market soar high the exchange rate depreciated as well as the inflation rate. Key Determinants of Inflation in Ghana. In the other hand, we also have some results that confirm remittance inflows can make some negative effects on the recipient economies including an increase in social inequality level in the case of poor countries because the remittance-receiving households might have a higher income than others Acosta et al. Table 7 and 8 revealed the responses of inflation to its own shocks and the shocks of other variables. Cooper 1971 , Krugman and Taylor 1978 and Taylor 1979, 1981 cited in Yiheyis 2006 argue that devaluation serves as a cost push factor in inflationary process via three routes: cost of imports, labor cost and the cost of working capital.

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Determinants of Inflation in Oil

determinants of inflation in developing countries

The test is necessary to make the model fits for policy option and analysis. The findings suggest that unrestrained political participation and the resulting demands placed on state officials undermine democratic performance. Changes in public spending and the nominal exchange rate affect inflation during three and four quarters, respectively. Figure 2 revealed the trend relationship between inflation, exchange rate and oil price. This will be the reference on the phenomenon of inflation for years to come.

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Determinants of Inflation in Oil

determinants of inflation in developing countries

The empirical results also indicate that among the various explanatory variables, three are found to exert especially strong effects on the Saudi inflation, namely, the growth rate of money supply, the growth rate of real income and the changes of the Saudi Riyal exchange rate against the U. The Johansson co-integration test revealed that all the variables exhibited co-integration relationship. We also suggest a model that has a structure determined by monetary and structural factors, and estimated by Johansen's cointegration technique. For achieving this objective a single-equation model of inflation in Saudi Arabia is specified and estimated. The results reveal several interesting policy implications. The mechanism linking the welfare effects of monetary surprises and hence the incentives to inflate to openness does not rely on a large-country terms of trade effect but rather is due to imperfect competition and nominal price rigidity in the non-traded sector.

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Inflation in Emerging and Developing Economies

determinants of inflation in developing countries

Currency in circulation is made up of coins and notes, while demand deposits or current account are those obligations which are not related with any interest payment and accepted by the public as a means of exchange drawn without notice by means of cheque. Some policy recommendations related to monetary and fiscal policies are suggested for elimination of harmful effects of resource boom and for preventing high price level in Azerbaijani economy. The results are observed for the full sample, and for the sample of developing countries. Noko 2016 asserts that monetary and fiscal policies may not be applicable in this situation to control the price level since inflation in this scenario is not caused by demand-pull inflation. However, challenging conditions in the economies were migrant workers reside has unveiled the increasing importance of external factors in determining their ability to send money back home. All daily newspapers cover the news about inflation. On the other hand table four of the cointegration test revealed that there is also a co-integration among the variables used in Ghana as revealed by the trace statistics.

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Studies of Inflation in Developing Countries

determinants of inflation in developing countries

Determinants of inflation in Nigeria: A cointegration approach. High difference between r 2 and adjusted r 2 indicates that there are some other significant variables which may influence the variations in dependent variable. Thus, researchers made all variables stationary after taking first differences with lag order four selected on basis of Akaike Information Criteria. The result of the findings collaborate the findings of previous studies especially that of Enu and Havi 2014 , and Olatunji, Omotesho, Ayinde and Ayinde 2010 who argued that inflation has long run relationship with its determinants in the country they investigated. The findings show that real output and money supply were the strongest forces exerting pressure on the price level. Determinants of Inflation in Tanzania. He argued that monetary authority adoption of tight interest rate will worsen the situation of price level in the long run.

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Determinant of Inflation in West African: Nigeria and others. EduCacInfo

determinants of inflation in developing countries

Apart from the commonly used economic determinants of inflation, we model the impact of remittances and institutional variables on inflation. Applied Econometrics and International Journal, 4 1. Economic literature revealed that moderate 2-5% inflation rate is necessary in an economy because it encourages investment and production as well as economic growth through multiplier effect. A formal model elucidates the linkages between the level of the real exchange rate and the rate of economic growth. Determinants of Inflation in Nigeria: An Empirical Analysis. Despite the sharply increasing remittances in developing countries especially in the Asia-Pacific region , the relationship between remittances and domestic investment in recipient countries has not been fluently evidenced. Accordingly, it focuses on i understanding of the dynamics of inflation, ii identification of major macroeconomic determinants of inflation, and iii econometric modelling of inflation in India.

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(PDF) Do Remittances Induce Inflation? Fresh Evidence from Developing Countries

determinants of inflation in developing countries

Inflation management is one of the most difficult jobs an economic policymaker has to carry out. Compared to previous research, it distinguishes specific features of the inflation process in advanced economies, emerging market and developing economies, and low-income countries. Proceedings of the 1980 Annual Conference of Nigerian Economic Society. If such a rise in price level persist for long it is known as inflation. Faria and Carneiro 2001 examined the relationship between inflation and economic growth in Brazil.


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Explaining Fiscal Policies and Inflation in Developing Countries

determinants of inflation in developing countries

The depreciation of the Saudi Riyal against the U. The results robustly confirm that remittances have a negative impact on domestic investment in these countries. Keynes argued that inflation can only occur when the aggregate demand exceed aggregate supply at the full employment level. Abstract This study examines the impacts of macroeconomic variables on the inflation in Nepal during 1975-2016. They use pooled probit analysis to estimate the contribution of the key factors to inflation starts. We derive a suitable approximation, calculate bounds on its errors, and suggest that in the usual cases these errors are likely to be small. Inflation is higher for almost all years and that of real output seems to be lower for almost all years.

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