Sources of Inflation in Algeria; 1970-2009
Inflation is regarded as regressive taxation against the poor. The most visible impact of inflation in recent times is its effect on real output and relative prices. The study focuses on investigating determinants of inflation in Algeria. For that purpose, this study has undertaken annual time serie...
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| Format: | Thesis |
| Language: | eng eng |
| Published: |
2012
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| Online Access: | https://etd.uum.edu.my/3243/1/BOUBEKEUR_BABA.pdf https://etd.uum.edu.my/3243/3/BOUBEKEUR_BABA.pdf |
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| Summary: | Inflation is regarded as regressive taxation against the poor. The most visible impact of inflation in recent times is its effect on real output and relative prices. The study focuses on investigating determinants of inflation in Algeria. For that purpose, this study has undertaken annual time series data for the period from 1970 to 2009. This study used the variables Gross Domestic Product (GDP), government expenditures, money supply and exchange rate as determinants of inflation in Algeria. The test for the unit roots has been performed by employing the Augmented Dickey Fuller test and Phillip Perron test. Long run and short run estimation have been investigated using Johansen Cointegration and Error Correction approach. The findings of the study reveal that in the long run inflation in Algeria is positively influenced by money supply, government expenditures and exchange rate. On the other hand the GDP reduces the overall price level in Algeria. Long run elasticities of price level with respect to money supply, GDP,government expenditures,money supply and exchange rate are -88.99,51.41,33.19 and 12.18, respectively. In the short run, the lagged GDP and the lagged exchange rate directly affect the inflation of current year. Therefore improvement in GDP, reducing government expenditures and controlling the monetary mass are necessary to stabilize the price level. |
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