2025/07/14 by SEID WOLIE ASSEN
#ARDL #Cost push inflation #Demand pulls inflation #Inflation #imported inflation.
paper · doi:10.20372/nadre:8539
Abstract Inflation, one of the basic indicators of macroeconomic stability, affects many other macroeconomic variables and it weakens the economy if it goes at increasing level. The main objective of the study is finding out the determinants of inflation in Ethiopia. The study was used a secondary data from the year 1990 to 2021 and collected from National Bank of Ethiopia, World Bank, World Governance Indicators and World Development Indicators. The ARDL bound test for co-integration has been used to find out the short run and long run determinants of inflation. Findings showed that in the long run personal remittance, real GDP and Budget deficit are significant and negative relationship on inflation at 1%, and 5% respectively. However foreign aid, tariff rate and international crude oil price affect inflation positively at 1%, and 5% in the long run. But broad money supply, nominal exchange rate, population growth rate and political stability are found to be insignificant in the long run. While in the short run Personal remittance and real GDP are affect inflation negatively at 1%, and 5%, level of significance respectively. On the other hand broad money supply, International crude oil price, foreign aid, Nominal exchange rate, external debit and budget deficit affects inflation positively at 1%, and5%, significance level in the short run. But population Growth rate and Tariff rate are insignificant in the short run. Moreover, the error correction term estimated at -0.8356 is significant at 1% significance level and has the recommended negative sign. Results confirm that cost push, demand pull factors, good governance problems and other imported inflations contribute to inflation in Ethiopia. The findings from this study reveal that inflation can be controlled by reducing money supply, foreign aid, Political instability and violence and international crude oil price