Inflation and Economic Growth in Ethiopia

Abstract

This study is focused on inflation of import goods and assesses and identifies the major determinants of import goods inflation in Ethiopia. To achieve this objective the study used time series data (from 1974/75 to 2012/13) to analyze the variables in its multiple linear regression model using ordinary least square (OLS) estimation technique. The model includes; broad money supply, real effective exchange rate & world oil price as independent variables and import price inflation as dependent variable. Findings of the study suggested that import price inflation in Ethiopia is significantly determined by broad money supply, real effective exchange rate and world oil price. Therefore based on this result revaluation of currency and finding another sources of energy and cooperating with other countries in stabilizing world oil price is recommended for government of Ethiopia.

Keywords: inflation , economic growth , multiple linear regression , currency ,M2

DOI: 10.7176/HRL/48-03