Determinants of Inflation and Effective Management Strategies: An Empirical Evidence from Ethiopia
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Date
2023-09-21
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AAU
Abstract
This research investigates the multifaceted nature of inflation in Ethiopia, aiming to propose
effective management strategies. It examines the influence of economic factors such as money
supply, exchange rates, and government spending on inflation, while also exploring the potential
impact of internal conflicts. Leveraging the ordinary least squares method facilitated by EViews
9 software, the study analyzes data from the Ministry of Finance, including variables such as the
Consumer Price Index (CPI), broad money supply (M2), and indicators of internal conflict.
Through descriptive and diagnostic analyses, the study establishes correlations between these
factors and inflation. The findings highlight significant relationships between inflation and
variables like money supply, exchange rates, and GDP, as well as a connection between internal
conflicts and inflationary pressures. Consequently, the study recommends targeted policy
interventions focused on regulating money supply, stabilizing exchange rates, and controlling
government spending to effectively manage inflation in Ethiopia. These insights offer valuable
guidance for policymakers aiming to foster economic stability and growth in the country