Determinants of Inflation in Sierra Leone

Emerson Jackson, Purity Kamara and Abdulsalam Kamara

MPRA Paper from University Library of Munich, Germany

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

Keywords: Inflation Targeting; Supply-Side; Demand-Side; Shocks; Sierra Leone (search for similar items in EconPapers)
JEL-codes: C22 E20 E3 E31 (search for similar items in EconPapers)
Date: 2022-09-01, Revised 2023-04
New Economics Papers: this item is included in nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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