The goal of this research is to close lack of sufficient, contemporary and comprehensive studies on the topic under study and gain a better understanding of the relationship between monetary policy and Ethiopian inflation.
The paper is organized as follows. After this introduction, the following section reviews the relevant literature, both theoretical and empirical. After this review, the methodological framework is presented. A series of test are show to assess the sensibility of the model. The discussion of the results is presented. Finally, some concluding remarks are shown.
The monetary policy pursued by a country's Central Bank has a significant impact on the country's economic and financial status. It is commonly acknowledged that maintaining price stability through monetary policy can contribute to long-term growth. When the rate of inflation is low enough, consumers and companies do not have to consider it when making daily decisions, according to Christiano and Fitzgerald.
The method, through which a country's monetary authority manages the supply of money, frequently by targeting an interest rate in order to promote economic growth and stability, is known as monetary policy. It is essentially a set of actions performed by monetary authorities, usually the central bank, to control and regulate the supply of money to the public as well as the flow of credit in order to achieve preset macroeconomic objectives.
Its stated objective is to maintain relatively steady pricing and low unemployment. All methods of monetary policy, in reality, require changing the amount of base currency in circulation. Open market operations are the open sales and purchases of (government-issued) debt and credit instruments that change the liquidity of the base currency. The monetary authority's constant market operations influence the supply of currency, which has an impact on other market variables including short-term interest rates and the exchange rate.
Table of Contents
Abstract
1 INTRODUCTION
2 LITRATURE REVIEW
2.1 Theoretical Review
2.2 Empirical Review
3 Methodology and Data Sources
3.1 Data Source and Variable Definitions
3.2 Variable Definitions and Expectations of sign
3.3 Estimation Method
3.3.1 Stationarity Test
3.3.3 Model Stability Check and Residual Diagnostic Test
3.4 Model Specification
3.4.1 Autoregressive Distributed Lag (ARDL) Model
4. Estimated Results and Interpretation
4.1 Descriptive Analysis
4.2 Unit Root Test
4.3 Testing for Bounds Test or Co-Integration
4.4 Long run model
Table 5: Estimated Long Run Coefficients of ARDL model
4.5 ARDL Short Run Estimate Output
5. CONCLUSION AND POLICY IMPLICATIONS
5.1 Conclusion
5.2 Policy Implications
Reference
- Quote paper
- Gediyon Bekele Moliso (Author), 2022, Effects of Monetary Policy on Inflation in Ethiopia. ARDL Co-Integration, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/1271754
