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

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

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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).

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 (search for similar items in EconPapers)
Date: 2025-05-25
New Economics Papers: this item is included in nep-ets and nep-mon
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Published in hal.archives-ouvertes.fr/hal-0144606, 2025, 2

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