The relationship of inflation and economic growth in Ethiopia

The relationship of inflation and economic growth in Ethiopia
Author: Deseke Kebede
Publisher: GRIN Verlag
Total Pages: 69
Release: 2017-11-28
Genre: Business & Economics
ISBN: 3668582432
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Research Paper (undergraduate) from the year 2017 in the subject Economics - Economic Cycle and Growth, grade: 1, , language: English, abstract: The purpose of the study is to examine the relationship between inflation and economic growth in Ethiopia over the period of 1991/92- 2014/15 by using data at quarter base. The study was employed Johansen method of co-integration and vector error correction model and a technique of conditional least square. The result shows that both in long-run and short-run the relationship between inflation and economic growth is positive. Despite to this, the granger causality test tells us bi- directional causation between these two variables. The result also revealed that threshold level of inflation beyond on which inflation negatively affects economic growth of Ethiopia is 5 percent. Therefore, co-ordination between macro- economic policy makers is vital and should have to raise their hands and put their eyes on measures that keep down inflation below 5 percent to have sustainable economic growth in the country.

The Dynamic Relationship Between Inflation and Economic Growth

The Dynamic Relationship Between Inflation and Economic Growth
Author: Abis Getachew Makuria
Publisher: LAP Lambert Academic Publishing
Total Pages: 188
Release: 2014-07-18
Genre:
ISBN: 9783659576164
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This study empirically assesses the relationship between inflation and economic growth in Ethiopia using quarterly dataset from 1992Q1 to 2010Q4. In doing so, an interesting policy issue arises. What is the threshold level of inflation for the Ethiopian economy? Based on the Engle-Granger and Johansen co-integration tests it is found out that there is a positive long-run relationship between inflation and economic growth. The error correction models show that in cases of short-run disequilibrium, the inflation model adjusts itself to its long-run path correcting roughly 40% of the imbalance in each quarter. In addition, based on the conditional least square technique, the estimated threshold model suggests 10% as the optimal level of inflation that facilitates growth. An inflation level higher or lower than the threshold level of inflation affects the economic growth negatively and hence fiscal and monetary policy coordination is vital to keep inflation at the threshold.

The causality relationship between money supply, inflation and Real GDP

The causality relationship between money supply, inflation and Real GDP
Author: Moges Endalamaw Yigermal
Publisher: GRIN Verlag
Total Pages: 23
Release: 2018-03-08
Genre: Business & Economics
ISBN: 3668655979
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Case Study from the year 2016 in the subject Economics - Monetary theory and policy, , language: English, abstract: Since the main objective of the paper is to test the existence of causality relationship between the three macroeconomic variables, namely real GDP, price level (CPI) and M2 money supply (MS), analysis has been made there by employing 40 years of data (data from 1975-2014). VAR Granger causality test has been made to verify the objective of the paper. The VAR Granger causality test result suggesting the existence of strong and significant correlation between the three variable s pairwise. The direction of causation is found to be a uni- directional causation between money supply and inflation, real GDP and Money supply and between real GDP and inflation and the causation runs from money supply to inflation, real GDP to Money supply and real GDP to inflation respectively. From the causation we observed that money supply has relationship with level of price and economic growth (real GDP). Basically targeting monetary expansion has a multiple role to boost economic growth and control the level of inflation.

The effect of exchange rates on economic growth in Ethiopia

The effect of exchange rates on economic growth in Ethiopia
Author: Muluken Nigussie Tessema
Publisher: GRIN Verlag
Total Pages: 81
Release: 2020-04-08
Genre: Business & Economics
ISBN: 334614514X
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Master's Thesis from the year 2016 in the subject Business economics - General, grade: 3.68, Saint Mary's University, language: English, abstract: This study attempts to investigate the effect of exchange rates on economic growth in Ethiopia using annual time series data spanning from 1985/86 to 2014/15. The explanatory variables in this study were real effective exchange rate, government final consumption expenditure, gross fixed capital formation, broad money supply and trade openness. The multilateral real exchange rates is used to measure real exchange rates. Results from Vector Error Correction Model revealed that real effective exchange rates, broad money supply and trade openness have a positive long run effect on economic growth, while government final consumption have a negative long run effect on the economic growth of Ethiopia. From the regression results, it was noted that undervaluation of the currency is contractionary in the long run and neutral in the short- run. As such, the effect of exchange rates on economic growth works through the supply channel. It is the reflection of various economic and policy shocks, mainly a strategy shifts, of the government. Based on the findings of this study, the researcher recommended that since the Ethiopian output is dominated by primary agricultural products and it is insensitive for the change in exchange rate. Government intervention is needed to balance the adverse effect of exchange rate movements until the economy well transformed from agricultural lead economy to industrial lead economy and becomes less dependent on imported raw materials.

Effects of Monetary Policy on Inflation in Ethiopia. ARDL Co-Integration

Effects of Monetary Policy on Inflation in Ethiopia. ARDL Co-Integration
Author: Gediyon Bekele Moliso
Publisher: GRIN Verlag
Total Pages: 30
Release: 2022-09-12
Genre: Business & Economics
ISBN: 3346721086
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Academic Paper from the year 2022 in the subject Economics - Monetary theory and policy, , language: English, abstract: The goal of this research is to close lack of sufficient, contemporary and comprehensive studies on the topic under study and gain a better understanding of the relationship between monetary policy and Ethiopian inflation. The paper is organized as follows. After this introduction, the following section reviews the relevant literature, both theoretical and empirical. After this review, the methodological framework is presented. A series of test are show to assess the sensibility of the model. The discussion of the results is presented. Finally, some concluding remarks are shown. The monetary policy pursued by a country's Central Bank has a significant impact on the country's economic and financial status. It is commonly acknowledged that maintaining price stability through monetary policy can contribute to long-term growth. When the rate of inflation is low enough, consumers and companies do not have to consider it when making daily decisions, according to Christiano and Fitzgerald. The method, through which a country's monetary authority manages the supply of money, frequently by targeting an interest rate in order to promote economic growth and stability, is known as monetary policy. It is essentially a set of actions performed by monetary authorities, usually the central bank, to control and regulate the supply of money to the public as well as the flow of credit in order to achieve preset macroeconomic objectives. Its stated objective is to maintain relatively steady pricing and low unemployment. All methods of monetary policy, in reality, require changing the amount of base currency in circulation. Open market operations are the open sales and purchases of (government-issued) debt and credit instruments that change the liquidity of the base currency. The monetary authority's constant market operations influence the supply of currency, which has an impact on other market variables including short-term interest rates and the exchange rate.

On the Nexus of Inflation, Unemployment, and Economic Growth in Ethiopia

On the Nexus of Inflation, Unemployment, and Economic Growth in Ethiopia
Author: Kasahun Niken
Publisher:
Total Pages: 0
Release: 2022
Genre:
ISBN:
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Perhaps no variable has received as much attention in the global economic literature as inflation and unemployment; no other macroeconomic variable has been as threatening to the global economy as these two, though. Especially in a fragile economy like Ethiopia, the cost of these variables is the worst. But how do inflation and unemployment poison the economy? We studied the relationship between inflation, unemployment, and economic growth in the least developed transitional economy of Ethiopia, using the annual series of data over the period 1980-2020. We have developed one model for each of the key macroeconomic variables involved in our analysis while also controlling for the effects of other potential variables in each case. We estimated all the models following the ARDL framework and found that there is a long-term relationship between variables entered the inflation and growth models. But, there is no evidence of a cointegrating equation in the unemployment model. In the estimation of our long-term growth model, it is shown that inflation and unemployment inhibit economic growth in some way, but the effect of both is trivial. This means that inflation and unemployment, which are rising alarmingly, are not a problem for Ethiopia's economic growth; suggesting, in turn, that economic growth in Ethiopia is exclusive. But their temporary role in economic growth is expected. Further, there is no meaningful long-term relationship between economic growth and inflation, while unemployment and inflation are correlated as expected. Apart from some recent efforts to modernize Ethiopia's agriculture, it would be of great help to instantaneously ensure sustainable growth and stable prices by encouraging, at best, labor-intensive investments, and enhancing productivity in other sectors. So doing will be the key to making the exclusionary economic growth inclusive.

Economic Growth and Development in Ethiopia

Economic Growth and Development in Ethiopia
Author: Almas Heshmati
Publisher: Springer
Total Pages: 314
Release: 2018-04-27
Genre: Business & Economics
ISBN: 9811081263
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This volume is a collection of selected empirical studies on determinants of economic growth and development in Ethiopia.The core argument for editing this book is to provide an up-to-date picture of the state and patterns of growth and development in Ethiopia. Ethiopia has been under focus in the past due to draughts, war, famine, development changes and the effects of global economic crisis in the country. A main contribution of this volume is that it helps identify selected important determinants of growth and development in Ethiopia and provides an estimation of their effects using up-to-date data, modelling and methods. Taken together the studies provide a comprehensive picture of the state of growth and development, their measurements, causal relationships and evaluation of efficient policies and practices in achieving progress in Ethiopia. The issues covered represent major challenges to the government and development organizations who are aiming at achieving higher growth and alleviating poverty in the country. The studies cover transition from rural agriculture to urban industry and the development of services.

Effects of Monetary Policy on International Trade in Ethiopia

Effects of Monetary Policy on International Trade in Ethiopia
Author: Gediyon Bekele Moliso
Publisher: GRIN Verlag
Total Pages: 41
Release: 2021-10-25
Genre: Business & Economics
ISBN: 3346521524
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Academic Paper from the year 2021 in the subject Economics - Monetary theory and policy, grade: A, , language: English, abstract: This study examined the effect of monetary policies on Total Trade (proxy of international trade) in Ethiopia between 1989 to 2019.International trade was captured using Total Trade (proxy of international trade) while the independent variables that described the various macroeconomic policies in Ethiopia were money supply, exchange rate, real lending rate and inflation rate. Time series data on the variables of the study was gotten from Annual reports of the National Bank of Ethiopia (NBE) from 1989-2019. The secondary data was analyzed using E-views 9.0 software. A model was formulated for the study. The Augmented Dickey Fuller (ADF) stationary test showed that the variables in the study were stable at both levels and at first difference. The regression of the independent variables with Total Trade (proxy of international trade) showed the existence of a long run relationship. Using the Autoregressive Distribute Model (ARDL), the empirical results money supply exerts a significant positive effect on Total Trade (proxy of international trade) in the long run while real lending rate and inflation rate exerts a significant negative effect on Total Trade (proxy of international trade) in the long run and Total Trade (proxy of international trade) one period lag of the variable significantly affects the Total Trade (proxy of international trade) in the short run. LagTT or D(LTT(-1)), a one percent increase in expectation push Total Trade (proxy of international trade) by 51% in short run. This result is similar to the theory of adaptive expectations, they states that individuals will form future expectations based on past events. The study thus concluded that the monetary policy channels through which Total Trade (proxy of international trade) in Ethiopia can be influenced are money supply, lending rate and inflation rate. The study testes all the diagnostic test like serial correlation, Normality, heteroschedasticity and stability. The estimate of the speed of adjustment coefficient found in this study indicates that about a 75% of the variation in the Total Trade (proxy of international trade) from its equilibrium level is corrected within a year.