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Inflation and Economic Activity in Suriname

Gavin Ooft

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: Maintaining a low rate of inflation and sustainable economic growth are at the core of monetary policymaking. Price stability is considered a condition for a healthy macroeconomic environment which promotes sustainable growth and a low rate of inflation is necessary to maintain stability in the financial sector as well as to boost investment activities. Motivated by the largely-discussed relationship between inflation and output, this paper examines this relationship for the economy of Suriname over the period 1975 to 2015, utilizing a vector autoregressive model and impulse response functions. The findings of the study reveal how the various sources of inflation impact on the economy of Suriname. Domestic price shocks and money-supply shocks, in particular, seem to substantially impact on economic activity. Exchange-rate shocks are detrimental to domestic prices. Based on the findings of this study, it is highly recommended for the Central Bank of Suriname to continue its prudent monetary policies in order to maintain a stable exchange rate and price stability. The study advocates for maintaining a healthy macroeconomic climate with price stability, which is a crucial condition for Suriname to follow a sustained path for economic growth and development.

Keywords: Inflation; Economic Growth; Vector Autoregression; Impulse Response Functions (search for similar items in EconPapers)
JEL-codes: E31 O42 C21 (search for similar items in EconPapers)
Date: 2016
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