The objective of this study is to identify the determinants of inflation in West Africa, mainly in the WAEMU zone, in order to contribute to improving the conduct of monetary policy. The equation of the exchange of the Quantitative Theory of the Currency and the generalized method of moments (MMG) in dynamic panel is used. Annual data concerning six countries in West Africa and range from 1991 to 2015. The results of the estimation show that in addition to the economic growth rate and the money supply, the devaluation has a significant effect on inflation. As we can see, inflation is not systematically a monetary phenomenon in West Africa. The authorities must therefore seek to determine the optimal threshold for the rate of increase of the money supply.
Using a series of econometric techniques, the study analysed interaction between monetary policy and private sector credit in Ghana. This study made use of monthly dataset spanning January 1999 to December 2019 of credit to the private sector (PSC) and broad money supply (M2). The results reveal that there exists cointegration, a long run stationary relation between monetary policy and private sector credit. This implies, increases in credit should prompt long-term increases in monetary policy. It is not surprising that growth in the private sector might have a stronger effect on monetary policy. The Error Correction Test is statistically significant and that all the variables demonstrate similar adjustment speeds. This implies that in the short run, both money supply and credit are somewhat equally responsive to their last period’s equilibrium error. There is unidirectional causation from private sector credit to monetary policy. It can be said that, there is an interaction between money supply and private sector credit. Thus, credit to private sector holds great potential in promoting economic growth. It can be recommended to the government to increase the credit flow to the private sector because of its strategic importance in creating and generating growth of the economy.
Using a series of econometric techniques, the study analysed interaction between monetary policy and private sector credit in Ghana. This study made use of monthly dataset spanning January 1999 to December 2019 of credit to the private sector (PSC) and broad money supply (M2). The results reveal that there exists cointegration, a long run stationary relation between monetary policy and private sector credit. This implies, increases in credit should prompt long-term increases in monetary policy. It is not surprising that growth in the private sector might have a stronger effect on monetary policy. The Error Correction Test is statistically significant and that all the variables demonstrate similar adjustment speeds. This implies that in the short run, both money supply and credit are somewhat equally responsive to their last period’s equilibrium error. There is unidirectional causation from private sector credit to monetary policy. It can be said that, there is an interaction between money supply and private sector credit. Thus, credit to private sector holds great potential in promoting economic growth. It can be recommended to the government to increase the credit flow to the private sector because of its strategic importance in creating and generating growth of the economy.
This paper studies the causal relationship between inflation and economic growth in Qatar for the period of 1980 to 2016. A time series analysis of unit roots tests, Johansen cointegration method and Granger causality tests were applied on data. The variables were found to be cointegrated, hence a long run-relationship between them exists. Granger causality test found causality runs from inflation to economic growth.
Dynamic Impact of Money Supply on Inflation: Evidence from ECOWAS Member Statesiosrjce
According to the monetarists, inflation is essentially a monetary phenomenon in the sense that a
continuous rise in the general price level is due to the rate of expansion in money supply far in excess of the
money actually demanded by economic units. But the link between changes in money supply and inflation is not
instantaneous. This study, therefore, assessed this dynamic linkage between money supply and inflation in
ECOWAS member states; West African Monetary Zone (WAMZ) and West African Economic Monetary Union
(WAEMU) for the period 1980-2012. The stationary properties of the series are explored both at univariate and
panel sense using KPSS and ADF; IPS and LLC. The results revealed that money supply and inflation are
stationary at the level for individual countries and at panel sense. The random effect model for ECOWAS
member states shows that the impact of money supply on inflation is effective in the current and first period.
While the impact is effective in the first period for WAMZ, WAEMU experiences the impact in current period.
The finding also reveals that there are significant specific-country effects on the variables. This implies that the
objective of macroeconomic convergence is yet to be achieved. The paper, therefore recommends that inflation
should be used as an operational guide in evaluating the effectiveness of monetary policy and also a strong
monetary cooperation programme among ECOWAS member states should be evolved.
Japan moved towards the road of economic export-oriented development, foreign trade and foreign investment increased rapidly after World War II, and the economy recovered rapidly and came to the forefront of the world. Then, what role did foreign capital and foreign trade play in the process of economic growth? Based on the import, export FDI and GDP data of Japan from 1996 to 2015, this paper uses eviews 7.2 and co-integration test to confirm the long-term co-integration relationship between GDP and import, export, FDI. The results show that the long-term equilibrium relationship between GDP and export is positive correlation, and GDP and import, FDI are negatively related long-term equilibrium relations. The influence of Japan’s export-oriented economy on economic growth is mainly through the form of export trade.
The Effect of Money Supply on InflationHuongHoang70
A study of how money supply affects inflation. The results show that a higher quantity of money supply is not always a cause of inflation.
Multiple linear regression and the GLS method were applied with the use of #Stata software for this research.
However, some additional modifications are needed to improve the model's goodness of fit and more endogenous factors should be added.
Future study might be: Would stimulus packages cause stagflation?
Statistical Analysis of Interrelationship between Money Supply Exchange Rates...Atif Ahmed
Several researches have been conducted to study the impact of different macro-economic variables and their influence on government expenditure. By using different statistical tools researchers have examined that how money supply and exchange rate influence the government expenditure. Few other studies also conducted work on the quarterly time series data to examine the long run equilibrium association between the macroeconomic variables.
Empirical Analysis of Fiscal Dominance and the Conduct of Monetary Policy in ...AJHSSR Journal
The study empirically investigates fiscal dominance and the conduct of monetary policy in
Nigeria, using quarterly data from 1986Q1 to 2016Q4. It adopts the vector error correction mechanism (VECM)
and cointegration technique to analyze the data and make inference. The findings reveal that there is no
evidence of fiscal dominance in Nigeria. The empirical results show that budget deficit, domestic debt and
money supply have no significant influence on the average price level. However, budget deficit and domestic
debt are shown to have significant influence on money supply, but only in the short-run. The policy implication
is that the government should enforce fiscal discipline through the appropriate institution and the Central Bank
should be given autonomy to perform the primary function of long-term price stability, among other functions.
Inflation is a continual increase in general price level of goods and services in an economy over a period of time. It is caused by many factors, important among them are excess of demand of goods and services over supply, macroeconomic performance, money supply, economic policies implications, environmental factors etc. A number of researchers in the past made attempts to identify determinants of inflation and to investigate the impact of identified variables on inflation in European and also in some Asian economies. But, in context of India, not many studies can be traced in the literature. The purpose of this paper is to shed some light on the impact of selected variables on inflation in India. The paper considers CPI (Consumer Price Index) inflation as dependent variable and a set of independent macroeconomic variables, which includes Gross Domestic Product, Money Supply, Deposit Rate, Prime Lending Rate, Exchange Rate, Trade Volume (Value of Imports and Exports) and Crude Oil Prices. The empirical analysis covers the quarterly data series for ten financial years from 2002Q1 to 2012Q1. The collected data is analyzed using ADF Unit root test, Granger Causality test, and the Ordinary Least Square (OLS) technique.
The agricultural sector in Eswatini is viewed as an engine to foster economic growth, reduce poverty and eradicate inequality. The purpose of the study was to investigate the effects of monetary policy on the agriculture Gross Domestic Product (GDP) in Eswatini using annual data for the period starting from 1980 to 2016. Using the Vector Error Correction model (VEC), the empirical results indicated that in the long run, agriculture GDP, exchange rate, interest rate, inflation, broad money supply, and agriculture credit have a negative effect on agriculture GDP in Eswatini. In the short run the study indicated that the variation in agriculture GDP is largely significant caused by the lagged agricultural GDP, interest rate, exchange rate as well as inflation. Money supply and agriculture credit contribute 0.46% and 0.55%, respectively to the variation in agricultural GDP. The study recommends that programs aimed at availing affordable credit to farmers should be prioritized to cushion the agriculture sector against adverse monetary policy shocks in the short to medium term, specifically interest rates, to ensure continuous production.
Developing economies are different than developed economies in many aspects, i.e., in terms of institutional framework and political situation etc. Thus, the monetary policy needed in developing countries is also different than developed countries. The goal of this study is to investigate exchange rate channel of monetary transmission mechanism in a developing country’s setup. The variables included in our analysis are interest rate, exchange rate, exports, consumer price index and gross domestic product. Johansen cointegration technique is applied to analyze the long run relationship among variables while multivariate VECM granger causality test is used to explore the direction of causality among the set of our variables. We use annual data ranging from 1980 to 2015 while taking account of the limitations of time series data. Our findings suggest that output has a negative long run relationship with exchange rate and interest rate, positive relationship with exports and no statistically significant relationship with inflation. Interest rate granger causes all four of our variables thus showing the power of this policy tool. Exchange rate causes exports, consumer price index and output which means exchange rate is the second most powerful variable in our analysis. Output is granger caused by interest rate, exports and exchange rate which confirms the sensitivity of output to these variables. Consumer price index is granger caused by all four of our variables and came out to be the most sensitive variable in our analysis.
This paper studies the causal relationship between inflation and economic growth in Qatar for the period of 1980 to 2016. A time series analysis of unit roots tests, Johansen cointegration method and Granger causality tests were applied on data. The variables were found to be cointegrated, hence a long run-relationship between them exists. Granger causality test found causality runs from inflation to economic growth.
Dynamic Impact of Money Supply on Inflation: Evidence from ECOWAS Member Statesiosrjce
According to the monetarists, inflation is essentially a monetary phenomenon in the sense that a
continuous rise in the general price level is due to the rate of expansion in money supply far in excess of the
money actually demanded by economic units. But the link between changes in money supply and inflation is not
instantaneous. This study, therefore, assessed this dynamic linkage between money supply and inflation in
ECOWAS member states; West African Monetary Zone (WAMZ) and West African Economic Monetary Union
(WAEMU) for the period 1980-2012. The stationary properties of the series are explored both at univariate and
panel sense using KPSS and ADF; IPS and LLC. The results revealed that money supply and inflation are
stationary at the level for individual countries and at panel sense. The random effect model for ECOWAS
member states shows that the impact of money supply on inflation is effective in the current and first period.
While the impact is effective in the first period for WAMZ, WAEMU experiences the impact in current period.
The finding also reveals that there are significant specific-country effects on the variables. This implies that the
objective of macroeconomic convergence is yet to be achieved. The paper, therefore recommends that inflation
should be used as an operational guide in evaluating the effectiveness of monetary policy and also a strong
monetary cooperation programme among ECOWAS member states should be evolved.
Japan moved towards the road of economic export-oriented development, foreign trade and foreign investment increased rapidly after World War II, and the economy recovered rapidly and came to the forefront of the world. Then, what role did foreign capital and foreign trade play in the process of economic growth? Based on the import, export FDI and GDP data of Japan from 1996 to 2015, this paper uses eviews 7.2 and co-integration test to confirm the long-term co-integration relationship between GDP and import, export, FDI. The results show that the long-term equilibrium relationship between GDP and export is positive correlation, and GDP and import, FDI are negatively related long-term equilibrium relations. The influence of Japan’s export-oriented economy on economic growth is mainly through the form of export trade.
The Effect of Money Supply on InflationHuongHoang70
A study of how money supply affects inflation. The results show that a higher quantity of money supply is not always a cause of inflation.
Multiple linear regression and the GLS method were applied with the use of #Stata software for this research.
However, some additional modifications are needed to improve the model's goodness of fit and more endogenous factors should be added.
Future study might be: Would stimulus packages cause stagflation?
Statistical Analysis of Interrelationship between Money Supply Exchange Rates...Atif Ahmed
Several researches have been conducted to study the impact of different macro-economic variables and their influence on government expenditure. By using different statistical tools researchers have examined that how money supply and exchange rate influence the government expenditure. Few other studies also conducted work on the quarterly time series data to examine the long run equilibrium association between the macroeconomic variables.
Empirical Analysis of Fiscal Dominance and the Conduct of Monetary Policy in ...AJHSSR Journal
The study empirically investigates fiscal dominance and the conduct of monetary policy in
Nigeria, using quarterly data from 1986Q1 to 2016Q4. It adopts the vector error correction mechanism (VECM)
and cointegration technique to analyze the data and make inference. The findings reveal that there is no
evidence of fiscal dominance in Nigeria. The empirical results show that budget deficit, domestic debt and
money supply have no significant influence on the average price level. However, budget deficit and domestic
debt are shown to have significant influence on money supply, but only in the short-run. The policy implication
is that the government should enforce fiscal discipline through the appropriate institution and the Central Bank
should be given autonomy to perform the primary function of long-term price stability, among other functions.
Inflation is a continual increase in general price level of goods and services in an economy over a period of time. It is caused by many factors, important among them are excess of demand of goods and services over supply, macroeconomic performance, money supply, economic policies implications, environmental factors etc. A number of researchers in the past made attempts to identify determinants of inflation and to investigate the impact of identified variables on inflation in European and also in some Asian economies. But, in context of India, not many studies can be traced in the literature. The purpose of this paper is to shed some light on the impact of selected variables on inflation in India. The paper considers CPI (Consumer Price Index) inflation as dependent variable and a set of independent macroeconomic variables, which includes Gross Domestic Product, Money Supply, Deposit Rate, Prime Lending Rate, Exchange Rate, Trade Volume (Value of Imports and Exports) and Crude Oil Prices. The empirical analysis covers the quarterly data series for ten financial years from 2002Q1 to 2012Q1. The collected data is analyzed using ADF Unit root test, Granger Causality test, and the Ordinary Least Square (OLS) technique.
The agricultural sector in Eswatini is viewed as an engine to foster economic growth, reduce poverty and eradicate inequality. The purpose of the study was to investigate the effects of monetary policy on the agriculture Gross Domestic Product (GDP) in Eswatini using annual data for the period starting from 1980 to 2016. Using the Vector Error Correction model (VEC), the empirical results indicated that in the long run, agriculture GDP, exchange rate, interest rate, inflation, broad money supply, and agriculture credit have a negative effect on agriculture GDP in Eswatini. In the short run the study indicated that the variation in agriculture GDP is largely significant caused by the lagged agricultural GDP, interest rate, exchange rate as well as inflation. Money supply and agriculture credit contribute 0.46% and 0.55%, respectively to the variation in agricultural GDP. The study recommends that programs aimed at availing affordable credit to farmers should be prioritized to cushion the agriculture sector against adverse monetary policy shocks in the short to medium term, specifically interest rates, to ensure continuous production.
Developing economies are different than developed economies in many aspects, i.e., in terms of institutional framework and political situation etc. Thus, the monetary policy needed in developing countries is also different than developed countries. The goal of this study is to investigate exchange rate channel of monetary transmission mechanism in a developing country’s setup. The variables included in our analysis are interest rate, exchange rate, exports, consumer price index and gross domestic product. Johansen cointegration technique is applied to analyze the long run relationship among variables while multivariate VECM granger causality test is used to explore the direction of causality among the set of our variables. We use annual data ranging from 1980 to 2015 while taking account of the limitations of time series data. Our findings suggest that output has a negative long run relationship with exchange rate and interest rate, positive relationship with exports and no statistically significant relationship with inflation. Interest rate granger causes all four of our variables thus showing the power of this policy tool. Exchange rate causes exports, consumer price index and output which means exchange rate is the second most powerful variable in our analysis. Output is granger caused by interest rate, exports and exchange rate which confirms the sensitivity of output to these variables. Consumer price index is granger caused by all four of our variables and came out to be the most sensitive variable in our analysis.
This study is about the impact of selected macroeconomic variables on economic growth of Bangladesh. Economic growth of Bangladesh is measured in terms of annual nominal GDP growth rate. Least squared regression model has been employed considering exchange rate, export, import and inflation rate as independent variables and gross domestic product as the dependent variable in this study. The results reveal that export and import have significant positive impact on GDP growth rate. The other variables (exchange rate and inflation) are not significant, indicating that there exists no significant relationship among the variables. The findings will help the policy makers to make policies concerning the country’s economic growth to remain robust in the near future.
CAPITAL MARKET DEVELOPMENT AND INFLATION IN NIGERIAAJHSSR Journal
ABSTRACT :This study examined the impact of inflation and capital market development in Nigeria. The
ultimate objective of the study is centered on an empirical investigation of inflation and its impact on the growth
of the Nigerian capital market, and also the trend of inflation and capital market development in Nigeria. In
order to achieve these objectives, the study used tables and graphs to examine the trend of inflation and capital
market development in Nigeria. Augmented Dickey Fuller unit root test was used to check the behavior of data,
and the ARDL bound test was used to check if variables are cointegrated. Post estimation test which includes
the serial correlation, heteroskedasticity and the histogram normality test was also conducted. Data were
collected from secondary sources, such as central bank of Nigeria statistical bulletin and the world development
indicator. The unit root test revealed that the financial sector, financial intermediaries and interest rate were
stationary at levels but exchange rate, inflation, government spending and trade openness became stationary
after the first difference. Empirical findings confirmed that there is a statistically significant long- and short-run
negative effect of inflation on capital market development. On the contrary, economic growth has a statistically
significant long- and short-run positive impact on capital market performance. In addition, results confirmed
that there is positive support of the previous financial sector policies on capital market performance in the
current period.
EFFECTIVE MONETARY POLICY AS A RECIPE FOR MACROECONOMIC STABILITY IN NIGERIApaperpublications3
Abstract: The basic objective of this paper was to investigate effective monetary policy as a recipe for macroeconomic stability in Nigeria, using annual time series data from 1981 to 2014. The paper employs OLS methodology with all the BLUE assumption. The results show that considering the magnitude, 1% increase in RGDP (proxy for economic growth) is brought about by 0.86% increase in narrow money supply (M1), 0.63% increase in broad money supply (M2), 258% decrease in inflation rate (INFLARATE), 1276.3% increase in lending rate (LEDRATE), and 143.9% increase in gross fixed capital formation. This implies that an increase in lending rate and other related variables will lead to a significant increase in real GDP, proxy for economic growth in Nigeria. The estimated value of R2 (goodness of fit) of 0.67 or 67% shows that 67% systematic variation in Real GDP is caused by variation in narrow money supply, broad money supply, inflation rate, lending rate, and gross fixed capital formation. This indicates that indeed, monetary policy has an effect on macroeconomic stability in Nigeria. The study seems to suggest that concerted efforts should be made by the government to focus on increment in narrow and broad money supplies which will aid in the financing of the country’s monetary growth, balancing the price increase, stimulating increased spending, and further enhancing the country’s macroeconomic variables.
This paper analysed the forecasting ability of yield-curve as a predictor of the short-run fluctuations in economic activities in Namibia. The study employed the techniques of unit root, cointegration, impulse response functions and forecast error variance decomposition on the quarterly data covering the period 1996 to 2015. The results revealed a negative relationship between the term structure of interest rates and economic activities, though statistically insignificant. This suggests that the yield-curve has no forecasting ability as a predictor of economic activity in Namibia.
The Nigerian Government both previous and present has introduced several policies and programmes to reduce or proffer remedial measures to militate against the negative impact of high inflationary levels on the Nigerian economy. All these measures have not led to a productive result as the inflation rate has continued to sour higher over the years. This paper aimed at examining the economic influence of the determinant factors that influence inflationary trends that are multi-dimensional and dynamic which continue to defy solutions. The data used for this work was sourced from the National Bureau of Statistics and Central Bank of Nigeria, from 1983 to 2020. The ordinary least square approach was used to analyze the data and the result shows that consumer’s price index, interest rate and total export has a positive effect on Nigeria inflation, but only the Consumer’s Price Index (CPI) have a statistically significant effect on the Nigeria inflation at 99% confidence interval. Result also shows that the exchange rate, foreign reserve, money supply, real GDP, real income and total imports has a negative effect though not statistically significant on the Nigeria inflation rate. The result of the granger causality test shows exchange rate and total imports to granger cause Nigeria inflation. It is recommended that Government should improve locally manufacture products to meet international demands to reduce total imports.
This study examined the effect interest rate on economic growth in Nigeria. Augmented Dickey – Fuller (ADF), Bound Test and Autoregressive Distributed Lag (ARDL) were employed to examine the effect of impact of interest rate on economic growth in Nigeria. The unit root test showed gross domestic product was 1(0) while interest rate, investment and gross capital formation were 1(1). The result of the Bound Test indicated long run relationship among the macroeconomic variables employed in the study. The result of the ARDL indicated that interest rate had negative effect on economic growth both in short run and long run. However, in the long run investment and gross capital formation were established to have positive effect on economic growth with gross capital formation being insignificant. It was concluded that interest rate has a macroeconomic tool is not effective in stimulating economic growth in Nigeria. It was recommended that the level of interest rate should be adequately controlled for the purpose of stimulating economic growth without inflationary pressure. Finally, robust macroeconomic policies aimed at ensuring economic stability should be formulated in order to increase capital formation and attract investment in order to promote economic growth.
Government budget control under the period of inflation: Evidence from Madaga...iosrjce
Madagascar is rich in resource undermine, maritime and natural but have been experiencing
Inflation now for more than four decades. Many studies and papers talk about the relationship between Inflation
and Budget Deficit. This paper seeks to test the hypothesis that budget control explicated by the budget deficit
cause inflation in Madagascar with some variable economically affect the inflation such as Gross Domestic
Product, exchange rate, Money supply, budget deficits and political crises that is during a thirty-three years
period: from 1981to 2014. The methodology employed for estimating long-run relationship is Augmented Ducky
Fuller test for a stationary data then cointegration analysis, with undertaking Granger causality tests. The
findings of the study are Malagasy Budget control is not inflationary and the inflation didn’t explain the budget
control. But the variable that cause the inflation in Madagascar are the Political Crises and Money Supply
Similar to The Determinants of Inflation in West Africa (20)
This study examined the influence of the characteristics of the audit committee on Palestinian firms’ value. The research explores precisely the effect on the Audit Committee characteristics’ efficiency, namely, independence, expertise, evaluating the relationship among dependent and independent variables. Secondary data collected from a list of companies were registered in the Palestine Stock Exchange from 2011 to 2018. Individual variables considered are the independence & expertise of the audit committee, whereas the ROA is employed as the dependent variable as an indicator of a firm’s value. The results showed that the Audit Committee’s independence & expertise substantially positive with ROA. The study concluded that the audit committee’s characteristics are enhancing firm performance. The implications of this study’s findings can be used by decisions and policymakers, the firm’s management, and other stockholders’ interests to create reliable ties between agents and the principals.
There is increasing acceptability of emotional intelligence as a major factor in personality assessment and effective human resource management. Emotional intelligence as the ability to build capacity, empathize, co-operate, motivate and develop others cannot be divorced from both effective performance and human resource management systems. The human person is crucial in defining organizational leadership and fortunes in terms of challenges and opportunities and walking across both multinational and bilateral relationships. The growing complexity of the business world requires a great deal of self-confidence, integrity, communication, conflict, and diversity management to keep the global enterprise within the paths of productivity and sustainability. Using the exploratory research design and 255 participants the result of this original study indicates a strong positive correlation between emotional intelligence and effective human resource management. The paper offers suggestions on further studies between emotional intelligence and human capital development and recommends conflict management as an integral part of effective human resource management.
This paper examines the role of loan characteristics in mortgage default probability for different mortgage lenders in the UK. The accuracy of default prediction is tested with two statistical methods, a probit model and linear discriminant analysis, using a unique dataset of defaulted commercial loan portfolios provided by sixty-six financial institutions. Both models establish that the attributes of the underlying real estate asset and the lender are significant factors in determining default probability for commercial mortgages. In addition to traditional risk factors such as loan-to-value and debt servicing coverage ratio lenders and regulators should consider loan characteristics to assess more accurately probabilities of default.
This study examined the impact of financial innovation on money demand in Nigeria, using quarterly time series for the period 2009-2019. The dependent variable was money demand, represented by broad money, while the independent variable was financial innovation represented by modern payment channels such as volume of Automated Teller Machines (ATMs) transactions, volume of Point of Sales (POS) transactions, volume of Internet banking transactions, and volume of Mobile banking transactions. The study employed the ordinary least squares (OLS) regression technique as the estimation method within the cointegration, granger causality, and error correction modeling. The result obtained showed that financial innovation has mixed impact on money demand in Nigeria during the period of analysis. For instance, financial innovation has positive impact on money demand through volume of ATM transactions in the current period, two periods lagged of volume of mobile banking transactions, current period and one period lagged of volume of internet banking transactions, and current period’s volume of Point of Sales (POS) transactions in Nigeria. On the other hand, financial innovation has negative impact on money demand through one period lagged of volume of point of sales in Nigeria. On the stability of the demand for money function, the result of the stability tests based on the CUSUM test and CUSUM of squares test showed that the demand for money function was stable during the evaluation period. The study recommended that monetary policy strategy of the central bank of Nigeria (CBN) should be fine-tuned to ensure it is well suited to deal with the challenges posed by financial innovation by way of proliferation of sophisticated payment channels.
Equity financing is one of the sources of funding available to non-bank financial institutions which is quite prevalent in developed financial markets for small or start-up firms. This study empirically determined the effect of the Equity Financing Scheme on a sustainable increase in productivity of agro-allied small businesses in Nigeria. Data for this study were elicited through the use of a questionnaire structured in a five-point likert scale. The evaluation of the relationship between the dependent and independent variables was performed using the Ordinary Least Square regression technique. The study revealed that the equity financing scheme had a positive and significant effect on the sustainable productivity of agro-allied small businesses in South-South Nigeria. The study recommended that efforts should be made to educate the small business entrepreneurs on the benefits of equity financing as a viable option towards business growth and expansion and that the government through the various intervention agencies should restructure the long-term loan policies to give access to more growth-oriented agro-allied businesses, to increase their presently low capacity to procure heavy-duty technology to increase productivity and achieve food security in Nigeria. Small business owners should take advantage of the membership of cooperative societies and as well maintain good business relationships with suppliers; this will guarantee a continuous supply of needed materials and uninterrupted operations of the business.
This study seeks to evaluate the impact of public borrowing on economic growth in Nigeria using time series data from 1980 to 2018. Specifically, the study seeks to analyze the effect of domestic debt (proxy by Federal Government Bonds-FGB) and external debt (proxy by International Monetary Fund Loan-IMFL) on Nigerian’s Gross Domestic Product (GDP). To achieve this objective, secondary data was collected from the Central Bank of Nigeria Statistical bulleting and the Debt Management Office of Nigeria. A multiple regression model involving the dependent variable (GDP) and the independent variables (FGB and IMFL) was formulated and subjected to econometric analysis. These variables were adjusted with the Jarque-bera test of normality while the correlation result was used to check the possibility of multi-collinearity among the variables. The t-test was used to answer the research questions and test the formulated hypotheses at the 5percent statistical level. Results from the analysis show that a positive relationship exists between IMF Loan and Nigeria’s gross domestic product, while a negative relationship exists between FG Bonds and Nigeria’s gross domestic product, which violates the Keynesian theory of public debt. The study concludes that both domestic and external debt significantly affect economic growth in Nigeria. Therefore, it was recommended that public borrowing should be efficiently used and contracted solely for economic reasons and not for social or political reasons as this will help to avoid accumulation of debt stock over time.
Equity investment financing is an innovative way of financing the real sector which has considerable developmental potential. The study empirically determined the effect of Equity investment financing on sustainable increase in productivity among agro-allied small businesses in South-South Nigeria. The instrument of data collection is the research questions structured in a five-point likert scale. The evaluation of the relationship between the dependent and independent variables was performed using the Ordinary Least Square regression technique. The study revealed that equity investment financing has a positive and significant effect on the sustainable productivity of businesses in Nigeria. The study recommended educating small business entrepreneurs on the benefits of equity financing as a viable option towards business growth and expansion and that the government through the various intervention agencies should restructure the long-term loan policies to give access to more growth-oriented agro-allied businesses, to increase their presently low capacity to procure heavy-duty technology to increase productivity and achieve food security in Nigeria. Small business owners should take advantage of the membership of cooperative societies and as well maintain good business relationships with suppliers; this will guarantee a continuous supply of needed materials and uninterrupted operations of the business.
This paper aims to explore the relationships of the performance of producer responsibility organizations (PROs) for waste oil, waste electrical and electronic equipment (WEEE), and end-of-life vehicles (ELV). The methodology consists in estimating the cointegration equations between the variables of lubricating oil production (SIG), electric and electronic equipment (EEE), and vehicle production (VP) using dynamic ordinary least squares (DOLS). Subsequently, elasticities are got based on estimates for Spain over the period 2007-2019 using quarterly data. The main results were that SIG and EEE were cointegrated variables. The elasticity of the SIG variable up to EEE was positive at 2, 4166. Additionally, the elasticity of the SIG variable up to VP was 2, 4050. However, SIG and VP are not cointegrated variables; subsequently, it was not a stable relationship between these variables. Results suggest it was because EPR was applied in WEEE PRO join with a deposit refund system (DRS); meanwhile, EPR in ELV PRO had been applied without subsidies to purchase cars.
In the process of R&D globalization, due to market demand and preferential policies, many multinational companies choose to invest in R&D in China. With the increase of labor costs in coastal areas and the rapid economic development of the central and western regions, multinational companies have already shifted from coastal areas to central and western regions when choosing R&D regions in China, especially in Shaanxi Province. Therefore, studying the character of R&D investment and operating performance of Multinational Corporation in Shaanxi Province has important practical significance. This article uses the data of the R&D investment of multinational corporation in the joint annual inspection of Shaanxi Province in 2018 as the sample and uses EXCEL software to conduct data analysis to gain an in-depth understanding of the character of R&D and investment of multinational corporation in Shaanxi Province, business characteristics and business performance. And it is concluded that the R&D investment of multinational corporation in Shaanxi Province has a series of characteristics such as concentration of distribution, concentration of enterprise scale, and overall good performance of operating performance.
In Bangladesh, migrant worker’s remittances constitute one of the most significant sources of external finance. This paper investigates the existence of relation between remittance inflow and GDP and the causal link between them in Bangladesh by employing the Granger causality test under a VECM framework. Using time series data over a 38 year period, we found that growth in remittances does lead to economic growth in Bangladesh. In addition to the relationship, this paper also points out some issues that are working as impediments in getting remittance and give some recommendations to overcome those impediments.
In the context of the 4.0 revolution, technology applications, especially cloud computing will have strong impacts on all areas, including accounting systems of enterprises. Cloud computing contributes to helping the enterprise accounting apparatus become compact, help automate the input process, improve the accuracy of the input data. Besides, the issur of accounting, reporting, risk control and information security also became better, contributing to improving the effectiveness of accounting. However, besides the positive impacts, businesses also face many difficulties in deploying and applying cloud computing. However, this application requirement will become an inevitable trend contributing to improving the operational efficiency of enterprises. To promote this process requires from the State as well as businesses themselves must have awareness and appropriate decisions. Breakthroughs in information technology have dramatically changed the accounting industry and the creation of financial statements. The Internet and the technologies that use the power of the Internet are playing an important role in the management and accounting activities of businesses - who always tend to be ready to receive and use public innovations technology in collecting, storing, processing and reporting information.
In recent years, Vietnam has joined international intergration by strong export agreements of bilateral and multilateral; Vietnam’s merchandise export in 1995 was only US $5.4 billion, in 2018 Vietnam’s merchandise export increased by 45 times compared to 1995 with US $244 billion. Vietnam’s imports increased by 29 times in 2018 compared to 1995. This study is an attempt to test a method of estimating the influence of exports on several Supply-sidefactors such as production value, value added and imports through the expansion of the standard system W. Leontief I.O and Miyazawa-style economic-demographic relations. This study also tries to make an experiment in the “Leontief Paradox”.The result is that Vietnam’s export value spread to production and imports but spread low to added value, especially in the processing industry group’s fabrication. The study is based on the non-competitive I.O table in 2012 and 2018 with 16 sectors.
The profitability of commercial banks is influenced by a number of internal and external factors. This paper attempts to identify the internal factors which significantly influence the profitability of commercial banks in Bangladesh. In this study, profitability is measured by ROA and ROE which may be significantly influenced by the internal factors such as IRS, NIM, CAR, CR, DG, LD, CTI and SIZE of the bank. Data are collected from published annual reports during 2014--2018 of 23 commercial banks. Using simple regression model, it is found that CR has significant effect on the profitability and CAR has significant influence on ROA only. In addition to this, DG has significant effects on PCBs’ profitability (ROE only) where as IRS and CTI have significant influence on profitability (ROA only) of ICBs. Further, none of these variables have significant effects on the profitability of SCBs but CAR and CR are correlated with profitability (ROA only) and the causes may be the nature of services provided by SCBs to its clients. The internal policy makers should manage the influential internal factors of the banks in order to increase their profitability so that they can meet stakeholders’ expectations.
This paper investigates if forecasting models based on Machine Learning (ML) Algorithms are capable to predict intraday prices in the small, frontier stock market of Romania. The results show that this is indeed the case. Moreover, the prediction accuracy of the various models improves as the forecasting horizon increases. Overall, ML forecasting models are superior to the passive buy and hold strategy, as well as to a naïve strategy that always predicts the last known price action will continue. However, we also show that this superior predictive ability cannot be converted into “abnormal”, economically significant profits after considering transaction costs. This implies that intraday stock prices incorporate information within the accepted bounds of weak-form market efficiency, and cannot be “timed” even by sophisticated investors equipped with state of the art ML prediction models.
Applying the Arrow-Debreu-Mundell-Fleming model as an economic standard model, with combining axiological framework and epistemological model, it is proposed to analyze economic policies with using a synthetic model, where interest, exchange and tax rates are integrated together. Except normal monetary and fiscal policies mainly via interest and tax rates, there are feasible ways to utilize modified strategies via exchange and tax rates. When ones need to simulate national local market, ones can raise the exchange rate. Otherwise, when ones need to promote international global trade, ones may lower the exchange rate. It is found that tax reduction is good policy when tax rate is higher than normal and that tax increase is good social policy when tax rate is lower than normal, during economic depression. Also it is revealed that tax reduction is good social policy when tax rate is lower than normal, and that tax increase is good policy when tax rate is higher than normal, during economic overheat. While economic system seeks efficiency and social system pursues equality, common interest modifications with elastic exchange and tax rates could be applied for balancing efficiency and equality.
In recent times, agricultural sector has returned to the forefront of development issues in Nigeria given its contribution to employment creation, sustainable food supply and provision of raw materials to other sectors of the economy. In lieu of that, this study examines the impact of agriculture on the economic growth in Nigeria using annual time series data covering the sample period of 1981 to 2018. To analyse the data collected, Autoregression Distributed Lag (ARDL) model through the bounds testing framework is employed to measure the presence of cointegrating relations between real GDP, agricultural productivity, labour force, and agricultural export. Results show the presence of both short-run and long-run relationship among the variables, and that agriculture has a positive and significant impact on economic growth in Nigeria. These findings inform the Nigerian government on the need to expedite labour force (human capital) and agricultural export (non-oil) development with the view to achieving sustainable growth and development. In addition, developing skills and competencies of labour force through capacity building in the agricultural sector will encourage research and development thereby increase the export size, hence essential for long-term growth.
The article illustrates the results of the economic development of the first fifteen years of the XXI century under the conditions of unprecedented economic freedom, globalization and the appearance of new informational sectors up to and including the first attempts at revising liberalism. The analysis of statistical data demonstrates an obvious increase in the percentage of well-off people in many countries as well as the increased economic capabilities of small, medium and large businesses, whose assets are distributed among an ever-increasing number of owners. This provides the impetus to review our collective approach to liberalization and globalization, as well as to view its unexpected strong sides that make human progress possible.
This paper investigates the relationship between working capital management and financial performance of Pharmaceuticals and Textile firms listed at the Dhaka Securities Exchange in Bangladesh. The data analysis was carried on ten Pharmaceuticals and Textile firms for a period of 2013 to 2017. Secondary Data was analyzed by applying Descriptive Statistics, Regression and Correlation analysis to findthe relationship of current ratio, inventory conversion period and average payment period with Return on Asset. The findings indicate that the Pharmaceuticals and Textile firms’ performance is influenced by the variables relating to working capital. There is a positive relationship between profitability and current ratioand Inventory Turnover period shows a negative relationship with profitability but Average payment period shows insignificant impact on profitability. The study concludes that there exists a relationship between working capital managementand financial performance of Pharmaceuticals and Textile firms in Bangladesh. The study recommends that for the Pharmaceuticals and Textile firms to remain profitable, they should employ working capital management practice that will help in making decisions about investment mix and policy, matching investment to objective, asset allocation for institution and balancing risk against profitability.
Organizational behaviour involves the design of work as well as the psychological, emotional and interpersonal behavioural dynamics that influence organizational performance. Management as a discipline concerned with the study of overseeing activities and supervising people to perform specific tasks is crucial in organizational behaviour and corporate effectiveness. Management emphasizes the design, implementation and arrangement of various administrative and organizational systems for corporate effectiveness. While the individuals, and groups bring their skills, knowledge, values, motives, and attitudes into the organization, and thereby influencing it, the organization, on the other hand, modifies or restructures the individuals and groups through its structure, culture, policies, politics, power, and procedures, and the roles expected to be played by the people in the organization. This study conducted through the exploratory research design involved 125 participants, and result showed strong positive relationship between the variables of interest. The study was never exhaustive due to limitations in terms of time and current relevant literature, therefore, further study could examine the relationship between personality characteristics and performance in the public sector, where productivity is not outstanding, when compared with the private sector. Based on the result of this investigation it was recommended that organizations should provide emotional intelligence programmes for their membership as an important pattern of increasing co-operative behaviours and corporate effectiveness.
This paper scrutinizes Determinants of Capital Structure: A study on some selected corporate firms in Bangladesh. We have taken 10 out of 37 listed companies of DSE dividing into two sectors i.e. Pharmaceuticals and chemicals and Tannery sector, five years data from 2013 to 2017 has been collected from respective annual reports. Total number of observations was 50. There are different factors that affect a firm's capital structure decision. We use leverage (D/E ratio) as dependent variable and independent variables are profitability, tangibility, tax, size, growth, non-debt tax shield (NDTS) and financial costs. By using Descriptive Statistical Analysis, Correlation Analysis and Regression Analysis tools we find that Tangibility, size, NDTS, and financial costs are positively related with leverage and Profitability, tax, and growth are negatively related with leverage. In our analysis we see profitability, tangibility of asset, growth and non-debt tax shield have significant association. So when we take capital structure decision of the above firms we should consider profitability, tangibility of asset, growth and non-debt tax shield because other independent variables are insignificant in the context of Bangladesh economy.
More from International Journal of Economics and Financial Research (20)
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
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Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
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Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
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Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
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Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
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Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
1. International Journal of Economics and Financial Research
ISSN(e): 2411-9407, ISSN(p): 2413-8533
Vol. 5, Issue. 5, pp: 100-105, 2019
URL: https://arpgweb.com/journal/journal/5
DOI: https://doi.org/10.32861/ijefr.55.100.105
Academic Research Publishing
Group
100
Original Research Open Access
The Determinants of Inflation in West Africa
Diabaté Nahoussé
Department of Economics, Alassane Ouattara University, Bouaké, Côte d’Ivoire
Abstract
The objective of this study is to identify the determinants of inflation in West Africa, mainly in the WAEMU zone,
in order to contribute to improving the conduct of monetary policy. The equation of the exchange of the Quantitative
Theory of the Currency and the generalized method of moments (MMG) in dynamic panel is used. Annual data
concerning six countries in West Africa and range from 1991 to 2015. The results of the estimation show that in
addition to the economic growth rate and the money supply, the devaluation has a significant effect on inflation. As
we can see, inflation is not systematically a monetary phenomenon in West Africa. The authorities must therefore
seek to determine the optimal threshold for the rate of increase of the money supply.
Keywords: Inflation; West Africa; WAEMU; Monetary policy; MMG.
CC BY: Creative Commons Attribution License 4.0
1. Introduction
Inflation creates instability, unrest and anxiety as it distorts the economic decision-making process and is an
obstruction to economic growth (Ftiti, 2010). But the questions about the causes of inflation are vast. Indeed, so-
called monetarist economists, such as Friedman (1963), state that "inflation is always and everywhere a monetary
phenomenon" in the sense that any increase in the quantity of money put into circulation is followed by a surge in
prices. For monetarists, banks are considered influential players in rising prices. They see money as the sole cause of
inflation. For these authors, banks participate in the process of inflation by the flow of additional purchasing power
that they inject into the economy. And this through the credits they grant to economic agents. The assumptions of the
monetarists are at the base of the various formulations of the quantitative theory of the currency given by Fisher in
1911 and the economists said of the school of Cambridge.
As for Keynesian approaches, inflation is a macroeconomic phenomenon. It comes from multiple reactions or
interactions between variables of the economic circuit. In Keynesian theory, inflation is due to an imbalance between
aggregate demand and the global supply of money. This is called inflation by demand. Another approach according
to Keynesians considers that inflation can come from a growth of the remuneration of the factors of production
higher than that of their productivity; we talk about inflation by costs. The New Phillips Keynesian Curves (NCPK)
present current inflation as a linear function of expected inflation and output gap (Output Gap). The NCPK identifies
three main determinants of inflation: the output gap, expected and / or delayed inflation, and supply shocks.
Keynesians also commented on growth inflation. Their explanation is to consider that inflation is a more or less
inescapable result of economic growth and wage increases that it generates. As a result, the risk of inflation only
exists in a situation of full employment and is a consequence of economic overheating.
Among psychologists, one of the primary causes of inflation are expectations. For them, individuals are
convinced that the process is cumulative and endless. They also consider mimetic contagions as determinants of
inflation.
As for the regulationist theory, the economic and political institutions of a country can also be considered as
influential factors of the price surge through what it calls the mode of regulation.
This theoretical divergence seems to be confirmed in the empirical work. Indeed, several studies have been
conducted to shed light on the implementation of monetary policy. This empirical work has identified the
determinants of inflation. Indeed, Musa and Yousif (2018) model the determinants of inflation in Sudan using the
GMM method for the period 2000-2017 in order to contribute to the formulation of an effective policy to reduce the
rate of inflation.
Their work shows that the increase in the money supplies and the reduction of the exchange rate lead to an
increase in the rate of inflation. However, the increase in gross domestic product, the unemployment rate and
government spending are leading to a fall in the inflation rate in Sudan. Sriyana (2018), analyzes the determinants of
inflation in the Yogyakarta region of Indonesia in the short and long term. He finds that the determinants of inflation
in Yogyakarta are the minimum wage, economic growth, and currency variables indicated by the exchange rate. It
also confirms the non-neutrality of the wage on price variations. Kuje et al. (2017), examine the determinants of
inflation in Nigeria from 1981 to 2010. The results of their study confirm that inflation is a monetary phenomenon in
Nigeria. Eftekhari and Kiaee (2015), study the influencing factors of inflation for a panel of countries available in the
World Bank database for 2008-2012. For this purpose, logistic logarithmic models with random effects and ordinal
logistic are used for the analysis. The results of the two models show that monetary growth, GDP, oil prices and
income levels of available countries are important determinants of expected inflation. Ochieng et al. (2016), analyze
the determinants of inflation in Kenya's economy. The study concludes that real GDP growth, price fluctuations
(changes in oil prices) and the inflation rate of the previous period (lagging inflation rate) are the ideal drivers of
2. International Journal of Economics and Financial Research
101
inflation in Kenya. Rahimov et al. (2016), assess the main determinants of inflation in Azerbaijan during the years
2003-2015. They use quarterly data on the Consumer Price Index (CPI), the trading partner CPI, the nominal
effective exchange rate (NEER), the money supply (M2), the real gross domestic product (PNGD) and credits to the
economy. VAR modeling is employed. The analysis of the impulse response and the decomposition of the variance
suggests that inflation is mainly due to foreign inflation, fiscal policy, the exchange rate. On the other hand, they find
that among the variables, inflation expectations, foreign inflation and monetary policy (credit variable) have a rapid
effect on headline inflation, while the effect of the budget variable is relatively slower (two quarters). They also find
that the appreciation of the exchange rate has a deflationary effect on domestic inflation. Bikai et al. (2016), identify
the determinants of inflation in the CEMAC with a particular look at the money supply. Using a panel VAR model
over the period from 1990 to 2014, they show that the money supply and imported inflation better explain the price
evolution in the CEMAC than the price of oil or the output gap. Specifically, fluctuations in inflation are due to
about 24% of money supply growth compared to about 6% for imported inflation. However, they observe a very
strong inertia of inflation (64% on average), reflecting structural problems and particularly a slow adjustment of
expectations of economic agents. Edward and Ramayah (2016), focus on the determinants of inflation in a few
Southeast Asian economies, namely Singapore, Malaysia and Indonesia. The independent variables selected include
money supply (M2), oil prices and the nominal exchange rate. This document uses the ordinary least squares
method. Overall, the results show that money supply (M2) is a significant predictor of inflation in the three countries
studied, in line with Milton Friedman's proposal. On the other hand, oil prices are only a significant predictor of
inflation in Singapore and Indonesia. Lim and Sek (2015), examine the factors influencing inflation in two groups of
countries (high inflation group and low inflation group) using annual data from 1970 to 2011. An error correction
model based on Autoregressive Time Delayed Modeling (ARDL) was used to analyze the short- and long-term
impact of each variable on inflation. The results indicate that GDP growth and imports of goods and services have a
significant long-term impact on inflation in low-inflation countries. The results also indicate that money supply,
domestic spending and GDP growth are the long-run determinants of inflation in high-inflation countries. In the
short term, none of the variables influences inflation in high inflation countries. However, money supply, imports of
goods and services, and GDP growth are significantly related to inflation in low inflation countries. Anfofum et al.
(2015), examine the main determinants of inflation in Nigeria for the period 1986-2011. VAR modeling was used.
The results show that fiscal deficits, the exchange rate, imports of goods and services, money supply and agricultural
production have a long-term influence on the inflation rate in Nigeria. Only the loan rate influences inflation in the
short and long term. According to their study, inflation in Nigeria is obviously influenced by fiscal and monetary
policy. Ruzima and Veerachamy (2015), examine the influence of government spending, the import of goods and
services, population growth, agricultural production and foreign direct investment on inflation. The time series for
the period 1970-2013 were used. Ordinary least squares (OLS) is used to estimate the model. They find that
agricultural production and the import of goods and services are the main factors of inflation in Rwanda. Population
growth is statistically significant and negatively correlated with inflation. Ndilkodje (2015), analyzes the
determinants of the consumer price index in the Democratic Republic of Congo. It is based on a methodology that
progressively combines a unit root test, a cointegration test and the use of an error-correction vector model. He came
to the conclusion that devaluation is a major factor of inflation.
Thus, placed at the heart of the economic debate, the control of inflation becomes a major concern of the
authority responsible for economic policy, in general and monetary in particular. The monetary authorities of the
Economic and Monetary Union of West African States (UEMOA) are not left behind. Indeed, the Central Bank of
West African States (BCEAO) has also set itself the main objective of price stability.
Clearly, there is a multitude of studies examining the determinants of inflation. But this review of literature
presents a weakness. There are few studies that have examined the determinants of inflation in WAEMU, taking into
account the existence of a probable hysteresis effect on inflation. However, the study of Mukras and Momanyi
(2016), concluded that the inflation rate of the previous period (lagged inflation rate) is an ideal factor influencing
inflation, especially in Kenya. Our study tries to fill this gap by using dynamic panel modeling. Thus, the existence
of a cumulative memory effect (past inflation influences that of today), leads us to the choice of a dynamic model.
The purpose of this work is therefore both descriptive and normative. These are: (i) firstly, to determine the factors
influencing inflation in WAEMU; (ii) secondly, to make available to the monetary authorities an additional decision-
making tool that would enhance their transparency and credibility. To achieve these objectives, we organize this
article as follows: the second section presents the methodology of the study, section 3 presents the results of the
estimates and finally the conclusion and the recommendations are the subject of section 4.
2. Methodological Approach
2.1. Basic Model
The starting point of our modeling is the exchange equation of the Quantitative Theory of Money (TQM). It is
an economic theory based on the causal relationship between the general level of prices and the amount of money in
circulation. It has been developed by different authors. Classics and neoclassicals consider that money is neutral.
Keynesians say the currency is active and can be used to improve economic performance. Monetarists argue that
money is also active but that its use is especially harmful for the economy.
The principle of this equation is to reconcile, by the equal registrants, a flow of monetary payments and a flow
of trade in goods and services. The TQM assigns a preponderant role to the amount of money in circulation in
explaining inflation. It is as follows:
3. International Journal of Economics and Financial Research
102
(1)
With:
: The average amount of money in circulation during the year in the community
: The velocity of currency circulation
: The general price level
: The overall volume of transactions, production, in other words real GDP
The quantitative theory of money adds the following assumptions:
Fisher assumes that is exogenous because it is determined by the goods market from the available factors
of production, is exogenous because it is determined by the technology and payment patterns of agents,
is exogenous because it is controlled by monetary authorities.
growth is determined in the long term by the growth factors of demography, capital accumulation and
technical progress.
According to the monetarists, the speed of circulation of the currency is constant, the level of production is
supposed constant also because of the situation of full employment of the factors of production in the economy.
From these two hypotheses, any increase in the quantity of money causes a rise in prices. All this leads
monetarists to think that inflation is only a purely monetary phenomenon.
The currency would therefore have no effect on the level of production of an economy (classical dichotomy). By
making the logarithmic derivative of equation 1 with respect to time, we obtain equation 2:
(2)
With:
: The growth rate of the money supply
: The rate of growth of the velocity of currency V. Like monetarists, we assume that the velocity of currency
circulation is constant, which renders its derivative null:
: The price change or the price growth rate or the rate of inflation.
: The real GDP growth rate. Since the level of production is assumed to be constant due to the full
employment situation of factors of production in the economy, we have: . We obtain the direct relationship
between inflation and monetary growth, which is the central proposition of the : the rate of growth of the
money supply is fully reflected in the rates of price growth. Equation 3 presents this relationship.
(3)
Moreover, based on the literature review, we can choose the main determinants of the inflation function. These
factors are linked to demand and supply to cover both demand-side inflation and rising costs, while having as their
basic theoretical model the quantitative theory of money. Thus, as determinants of inflation, we retain the monetary
(Musa and Yousif, 2018; Sriyana, 2018), the gross domestic product (Eftekhari and Kiaee, 2015; Kuje et al., 2017),
imported inflation (Bikai et al., 2016), employment (Phillips, 1958). In addition, the existence of a cumulative
memory effect (past inflation influences that of today), that is to say the consideration of a probable hysteresis effect
at the level of inflation, leads us to the choice of a dynamic model. Also, to take into account the effect of the
exchange rate (Musa and Yousif, 2018; Sriyana, 2018), we integrated the decision that modifies the exchange rate by
fixing it at 100 Francs CFA for a French franc in 1994. It is measured by a variable dummy marked by 0 for the
years before 1995 and by 1 for the years from 1995 to 2015. Equation 4 presents the final form of the inflation
function:
(4)
Table 1 gives some brief descriptions and notations for these variables that will be used in the data analysis.
Table-1. Description, Symbols and Measures of Determinants
Symbols Represent Description Source
Real GDP Growth
rate
Economic growth; Annual changes in gross domestic
product at constant prices in each country.
BCEAO (2018)
Growth rate of
money supply
Annual changes in the quantity of money and quasi-
money in each country.
BCEAO (2018)
Imported inflation Domestic prices rise as a result of higher imports. We use
as proxy for imported inflation, the index of consumer
prices in France.
World Bank
(WDI, 2018)
Employment-
population ratio
The proportion of the population aged 15 and over who
has a job in each country.
World Bank
(WDI, 2018)
Devaluation of the
CFA
Change in the parity of the CFA franc in 1994. It is
measured by 0 for the years before 1995 and by 1 for the
years from 1995 to 2015.
Variable
«Dummy»
chosen by the
author
Source: Author
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These are annual data, with a study period from 1991 to 2015. Guinea-Bissau was not taken into account due to
the lack of data available in some years. Indeed, Guinea-Bissau joined UEMOA in May 1997.
2.2. Estimation Method
The estimation method chosen is the generalized moments method (MMG) in dynamic panel, introduced by
(Areliano and Bover, 1995; Arellano and Bond, 1991). Unlike dynamic panel MMGs, standard econometric
techniques such as OLS do not provide unbiased estimates because of the presence of the delayed dependent variable
to the right of the equation. It follows from biased estimates. The generalized moments method (MMG) is based on
the orthogonality conditions between the lagged variables and the error term both in the first and the first difference.
The generalized moments method has very specific advantages, namely the nature of the data panel and the solutions
it provides. Indeed, the dynamic panel MMG method makes it possible to provide solutions to the problems of
simultaneity bias, inverse causality and omitted variables. Also, this method makes it possible both to control the
individual and temporal specific effects and to overcome the endogeneity biases of the variables, especially when
there are one or more delays of the dependent variable as an explanatory variable. In case of endogeneity, estimates
are made using instruments. An instrument for an endogenous variable is a variable that is not correlated to errors
but correlates with the endogenous explanatory variable in question. Thus, it gives an efficient estimation of the
model contrary to the Ordinary Methods.
There are two variants of the dynamic panel MMG estimator (Sargan, 1958): The first difference MMG
estimator of Arellano and Bond (1991) and the MMG system estimator of Blundel and Bond (1998). In order to
estimate our model, we use the "Diff MMG" generalized moments method from Arellano and Bond (1991). This
estimator is based on the first difference of the variables and thus eliminates the country-specific effects while taking
as instruments appropriate levels of lagged values (in level) for all potentially endogenous variables.
Autocorrelation tests of the first difference errors are proposed by Arellano and Bond (1991) to verify the
validity of these moment conditions. In addition, the Sargan (1958) and Hansen (1982) over-identification tests make
it possible to check the exogeneity of the instruments and to validate them.
After the methodological approach, we present the different results of the tests and the final estimation of the
model.
3. Results
3.1. Descriptive Statistics
Table 2 summarizes the results of descriptive statistics for raw variables prior to modeling. The standard
deviations of the different variables are small; a logarithmic transformation is not necessary.
Table-2. Descriptive statistics on variables
Variables Average Standard deviation Minimum Maximum
3,606 6,725 -7,796 39,163
2,806 0,443 1,904 3,851
1,595 0,776 0,038 3,217
3,847 3,571 -13,723 16,247
64,669 7,312 44,671 81,702
Source: Author based on data from the BCEAO (2018) and WDI (2018)
3.2. Presentation of Test Results
Table 3 presents the results of the interindividual dependency test of Pesaran and Smith (1995). It clearly
indicates that there is a strong cross-sectional dependence between the different variables of our model because the
p-values are less than 5%; we therefore reject the null hypothesis.
Table-3. Interindividual dependency test of Pesaran and Smith (1995)
Variables CD-test P-value Corr.
25,36 0,000*** 0,935
3,75 0,005** 0,187
7,31 0,000*** 0,332
5,24 0,000*** 0,431
-4,63 0,001*** -0,275
Note: ***; ** * significant at the 1%, 5% and 10%
thresholds respectively
Source: Author based on data from the BCEAO (2018)
and WDI (2018)
Table 4 presents the results of unit root tests. The inflation rate and real GDP growth rate, temperature and
precipitation variations are stationary in level. On the other hand, we find that the growth rate of money supply and
imported inflation are stationary in first difference.
5. International Journal of Economics and Financial Research
104
Table-4. Summary Table of IPS and CIPS Unit Root Tests
Variables Level variables Difference 1st
Degree of
integrationIPS CIPS IPS CIPS
Coef. p-value Coef. Coef. p-value Coef.
7,193 0,000 -6,989*** -7,510 0,000 -7,408*** I(0)
0,027 0,582 -1,603 -5,016 0,000 -5,526*** I(1)
-4,002 0,002 -5,344*** -6,986 0,000 -6,129*** I(0)
-4,381 0,009 -7,182 -5,464 0,000 -5,751*** I(0)
-0,257 0,343 1,874 -5,017 0,000 -6,381*** I(1)
Note: ***; ** * significant at the 1%, 5% and 10% thresholds respectively
Source: Author based on data from the BCEAO (2018) and WDI (2018)
The result of the autocorrelation test gives us a probability greater than 5% (Prob> z = 0.0734). We can’t reject
the null hypothesis. The test result is shown in Table 5.
Table-5. Result of the autocorrelation test error of Arellano and Bond (1991).
Order Z Prob > z
1 -0,194 0,103
Source: Author based on data from the BCEAO (2018) and WDI (2018)
There is no autocorrelation between the variables and the error term. As for the normality test for Jarque and
Bera (1980) residues, with a probability lower than the 5% threshold (Prob> chi2 = 0.000), we reject H0. We
conclude that the residues do not follow a normal distribution.
3.3. Result of the Model Estimation
The estimation was done in one step and we used the "robust" option to free ourselves from the detrimental
effects on the estimators due to the presence of autocorrelation of errors and / or heteroscedasticity in the panel. The
estimated model is globally significant at the 1% level. The Arellano-Bond first order difference autocorrelation test
confirms the validity of the moment conditions and therefore of the estimator (Table 6).
Table-6. Results of model estimation
Dependent variable: Inflation rate coefficients Standard error z-stat p-value
Inflation (-1) 2,93* 0,54 1,38 0,10
M2 money supply growth rate -5,72*** 0,99 -4,01 0,00
Real GDP growth rate 0,83 0,20 1,62 0,11
Imported Inflation 2,25*** 0,10 10,82 0,00
Employment -0,28 0,09 -0,80 0,40
Devaluation 0,64*** 6,00 4,95 0,00
Constant -5,21 12,93 -0,35 0,66
Number of observations 161 --
Overall significance -- 0,0000
AR(1) -- -0,19 0,10
Note: ***; ** * significant at the 1%, 5% and 10% thresholds respectively
Source: Author based on data from the BCEAO (2018) and WDI (2018)
4. Discussion
The results of the estimation show that within WAEMU, the determinants of inflation are the growth rate of the
money supply, imported inflation and devaluation. At the 1% threshold, the growth rate of money supply has a
negative and significant effect on inflation within WAEMU. Indeed, an increase in the growth rate of the money
supply leads to a fall in inflation of 5.72%. This can be explained by the fact that a significant proportion of the
increase in the money supply, below a certain threshold, contributes to increasing the possibilities of production and
therefore of supply. In fact, faced with a financing gap, any additional increase in the money supply comes as a
response to the financing needs of the WAEMU economies. And this increase in supply has a downward effect on
the prices of goods and services. In addition, it is possible that beyond a threshold any additional increase will lead to
higher prices. Our result shows that inflation is not systematically a monetary phenomenon in WAEMU. Moreover,
our study contradicts those of some authors who find a positive relationship and significant between money supply
and inflation (Bikai et al., 2016; Kuje et al., 2017; Lim and Sek, 2015; Musa and Yousif, 2018; Sriyana, 2018).
Imported inflation has a positive and significant effect on inflation. Indeed, an increase in imported inflation
induces an increase in domestic inflation of 2.25% in WAEMU. In fact, imported products account for about 34% of
goods and services in the UEMOA consumer basket. In addition, a significant number of local products consumed
by households have significant import content. Given this weight, price developments in supplier countries,
particularly in France, the Union's main trading partner, affect the level of inflation in the zone. Moreover, the
linkage of the FCFA first to the French franc and then to the euro requires long-term convergence of inflation in
WAEMU and France. This result is in line with those of Bikai et al. (2016) and Rahimov et al. (2016) who finds a
positive effect of imported inflation on domestic inflation.
We note a positive effect of the devaluation on inflation in WAEMU. Indeed, the devaluation encouraged
imports of goods and services from France. In addition, another explanation would be the monetary policy of the
6. International Journal of Economics and Financial Research
105
EURO zone to which the CFA franc is directly pegged. Our result is consistent with those of Ndilkodje (2015) in the
Democratic Republic of Congo. Indeed, these authors have identified devaluation as major factors influencing
inflation in the Democratic Republic of Congo.
5. Conclusion
The objective of our study was to analyze the determinants of inflation in the WAEMU zone. The estimation
method chosen is the generalized moments method (MMG) in dynamic panel of Arellano and Bond (1991) and
Areliano and Bover (1995). The estimation was done in one step and we used the "robust" option to free ourselves
from the detrimental effects on the estimators due to the presence of autocorrelation of errors or heteroscedasticity in
the panel. Empirically, we have been able to identify the factors that influence inflation in the WAEMU economies.
The results of the estimation show that in addition to the economic growth rate and the money supply, the
devaluation has a significant effect on inflation. As we can see, inflation is not systematically a monetary
phenomenon in WAEMU. Moreover, our study contradicts those of some authors (Bikai et al., 2016; Kuje et al.,
2017; Lim and Sek, 2015; Musa and Yousif, 2018; Sriyana, 2018).
The authorities must therefore seek to determine the optimal threshold for the rate of increase of the money
supply.
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