Inflation Dynamics: A Comprehensive Analysis of Key Determinants Using Panel Data

This study examines the effect of monetary policy on economic growth of West African Monetary Zone (WAMZ) countries from 2002 - 2022. In the model, money supply (M2), interest rate (INTR), and inflation rate (INFR) are considered the independent variable while real gross domestic product (RGDP) is given as the dependent variable. This study used Ordinary Least Square (OLS) and Panel regression analysis, and finding indicate that money supply and interest rate have positive and statistically significant impact on economic growth among WAMZ member countries. The inflation rate has negative and significant impact on GDP. The random effect model on the other hand reveals that money supply is positive and statistically significant on GDP. Similarly, the effect of interest rate is positive but statistically insignificant on economic growth. However, the impact of inflation rate is negative but statistically significant on economic growth of the WAMZ member countries. Therefore, the study recommends the implementation of sound monetary policies such as expansionary Open Market Operation (to increase money supply as increase in money supply increases economic growth), adjust the contractionary discount rate (by reducing the rate of interest rate in order to expand liquidity and investment). The study also recommended that WAMZ country’s banks should be committed to the mission of price stability, as well as improving the regulatory and supervisory framework to secure a strong financial sector for efficient intermediation, economic growth and development.

This study analyzes the relationship between macroeconomic factors that affect the inflation rate. Through our research, we will analyze the impact of money supply growth, economic growth, import level and export level on the inflation rate for 40 countries that we have taken. There are: 6 Latin American countries, 2 Western Balkan countries, 19 Europe countries, 10 countries of Asia, 2 countries of Africa and Australia, within 8 years, namely from 2012 to 2023. The data for the execution of the work were obtained from the World Bank as a credible institution for the publication of statistics and Trading Economics, Another important institution in terms of statistics where 320 observations which are included in the analysis, so the data of this study are second- hand data. Since we have a group of study countries, then the data type of the study is Panel. The econometric model that we used for analysis is the model with the method of small squares. The findings of this paper show that countries that increase the money supply will also face an increase in the inflation rate, so the impact of the money supply on the inflation rate is positive. In the research countries, the results show us that we have a very small difference in the average import and export, which results in a very small average economic growth.

This study investigates the relationships between remittances, financial development, and economic growth in Western Balkan countries during 2002-2022. Employing a dynamic panel data approach, the research encompasses a multi-faceted regression strategy, including Ordinary Least Squares (OLS), Fixed Effects, and Two-Stage Least Squares (2SLS) models. This approach is particularly designed to address potential endogeneity issues in remittances and financial development indicators. The analysis reveals that remittances have been a significant growth driver in the Western Balkans, with their impact being more pronounced in countries with less developed financial systems. This finding suggests a substitutive relationship between remittances and financial development. The study also indicates that financial development, measured through Money Supply and Net Interest Margin, has a complex and unclear impact on economic growth. The interaction between remittances and financial development is also a focal point, with significant negative coefficients indicating that in regions with limited financial development, remittances play a crucial role in filling the gaps left by inefficient financial markets. The study contributes to the understanding of how remittances and financial development interact and influence economic growth, providing valuable insights for policy formulation in the Western Balkans.

The influence of international trade freedom on economic growth is a significant factor. International trade promotes trade freedom (Unger, 2007), and most studies show the positive impacts of trade freedom on economic growth (Mercan et al., 2013). In this study, we search for the effects of international trade freedom on the Western Balkan countries’ economic growth using the Fraser Institute annual data from 2000 to 2021. The paper consists of panel data, and the results are analyzed with the following models: pooled ordinary least squares (OLS), fixed effect, random effect, and generalized method of moments (GMM). Our findings show a positive relationship between the freedom of international trade and economic growth. High tariffs on international commerce, trade barrier control, and domestic trade freedom all impacted growth; on the other hand, tariffs and trade barrier regulations harm economic growth. The gross domestic product (GDP) coefficient per capita at lag one is 0.9535, implying that a unit increase in GDP per capita at lag one increases GDP per capita by 0.9535. The ultimate conclusion is that more trade liberalization with a preference for exports, institutional reforms, foreign direct investment (FDI) inflows, structural improvements, and strengthened collaboration with the European Union have a long-term influence on the Western Balkans nations’ quicker economic growth.

This study adopts the Vector Autoregressive (VAR) model to analyze the relationship between key macroeconomic variables and economic growth in Nigeria, Using time series data sourced from the World Bank Development Indicators (WDI), for the period 1980 to 2021. The key macroeconomic variables analyzed are inflation, exchange rate and money supply. The result gives an average high R2 of 0.7000 which connotes that the overall model is a good fit. The result of the VAR analysis at lag two indicates that the variables are dynamically interacted. Starting with the growth (GDP) equation, a 1% increase in the previous year values of exchange rate, GDP, inflation, and money supply lead to a 0.3% increase, 33% increase, 3% increase, and 26% increase in current GDP respectively. Here, GDP and money are positively related. The money supply shows that a 1% increase in the previous year values of exchange rate, GDP, inflation and money supply lead to a zero per cent decrease, 8% decrease, 7% decrease and 91% increase in current money supply. The result is consistent with monetary policy given that the relationship between money supply and inflation. The equation of inflation shows that a 1% increase in the previous year values of exchange rate, GDP, inflation and money supply lead to 9% decrease, 33% decrease, 68% increase and 15% increase in the current level of inflation. The consequences of a growing inflation and high exchange rate phenomenon are so damning that Nigeria cannot afford them. Such implications are glaring in the economy of Nigeria where many negative developments were traceable to the non-availability or insufficiency of foreign exchange for businesses especially small and medium enterprises (SME’s) with a frequent rise in general price level. Therefore, the need to aptly address this ugly development by the monetary and fiscal authority cannot be overemphasized. Keywords: Money supply; economic growth; VAR model, Inflation and exchange rate. DOI: 10.7176/JESD/14-8-06 Publication date: April 30 th 2023

The majority of the literature considers that the establishment of stable institutions, providing better levels of security of property rights, is the key-factor to economic growth, taking into account the creation of favorable conditions to new investments and technological developments, especially considering an environment of globalization. In this sense, these “good institutions”, or the so-called good governance, are closely related to the maintenance of the status quo, that is, the permanence of political and economic stabilities. On the other hand, economic growth requires, in a large way, political and economic changes to allow reforms, to make it possible. We verify, using statistical methods as Ordinary Least Squares ( OLS ), Least Square in TwoStages ( 2QLS ), Generalized Method of Moments ( GMM ), among others, that, despite the relevance of variables associated with good governance, the Brazilian economic growth is related negatively with the large numbers of veto players ( agents with power veto) and the same happened to South American and East Asian countries. In some cases, the income growth rate is negatively related to the tenure of the veto players and their drop rate from the government basis. Thus, the weaker capacity to veto political and economic changes were associated to better economic growth rates, which does not mean one must not have institutional stability, but points out that the capacity to change the status quo is fundamental to generate conditions to economic growth in developing countries. Key-Words: Economic Growth. Institutions .Governance.Veto Players. * Visiting Scholar at the Institute of Latin American Studies – ILAS , Columbia University – New York, Researcher at the Federal University of Pernambuco (UFPE), Professor at the Catholic University of Pernambuco (UNICAP) and Fiscal Auditor at the State of Pernambuco (SEFAZ – PE) e-mail: jf2547@columbia.edu or jose.ferreira@sefaz.pe.gov.br

Purpose- The study investigates the effect of financial deepening on stock market performance in selected Sub-Saharan African countries by determining the relationship that exist between financial deepening and stock market performance. Expansion in the financial services to reach out to the underbanked or unbanked in our society enables these individuals to assess banking services, thereby boosting economic activities. Methodology- The study considers four selected countries in Sub-Saharan African over the period 2001 to 2019. Multiple regression analysis techniques were used with Seemingly Unrelated Regression (SUR) to analyse the data. SUR used in this analysis provides the lowest standard errors of the estimated parameters. Findings- Ordinary Least Square (OLS) gives consistent results. However, it is not as efficient as the SUR method, which amounts to feasible generalised least squares with a specific form of the variance matrix. It solves the problem of endogeneity. The study conducted Augmented Dicky Fuller (ADF) test, Hausman test, and Bruce Pagan test to avoid any challenges associated with data normality. Conclusion- The research finds out that broad money supply, a proxy for financial deepening, positively and statistically significantly impacted stock market performance in each of the four countries. It was recommended that all countries involved in this study and others implement policies that seek to enhance financial deepening in increasing broad money supply as a percentage of GDP. The increase in overall money supply allows for investment in productive sectors of the economy. Keywords: Sub-Saharan Africa, seemingly unrelated regression, Augmented Dicky Fuller, investigates, ordinary least squares. JEL Codes: E51, F21

This study examined the effect of money supply on private sector funding in Nigeria. The purpose of the study was to examine the extent to which monetary policy affect private sector funding in Nigeria. Time series data was sourced from Central Bank of Nigeria Statistical Bulletin from 1985-2018. Credit to private sector, credit to core private sector and credit to small and medium scale enterprises sector was used as dependent variables while narrow money supply, broad money supply, large money supply, private sector demand deposit was used as independent variables. Ordinary Least Square (OLS), Augmented Dickey Fuller Test, Johansen Co-integration test, normalized co-integrating equations, parsimonious vector error correction model and pair-wise causality tests were used to conduct the investigations and analysis. The empirical findings revealed that money supply explains 82.1 percent variation on credit to core private sector, 85.2 percent and 23.4 percent of the variation in credit to private sector and credit to small and medium scale enterprises sector. The study conclude that money supply has significant relationship with credit to private sector, credit to core private sector and credit to small and medium scale enterprises sector. From the findings, the study recommends that Central Bank of Nigeria should induce the variations of the amount of money changes through the nominal interest rates. That the monetary authorities should ensure adequate quantity of money supply that positively affect private sector funding in Nigeria.

This paper aims to determine a threshold level in the relationship between inflation and economic growth in Vietnam. Our paper is considered as one of the first empirical studies on inflation threshold in Vietnam - a country in transition from a communist centrally-planned to a market economy. The research applied three regression methods including Ordinary Least Squares (OLS), Two-Stages Least Squares (2-SLS) and Generalized Method of Moments (GMM) with annual data for the period of 1986 - 2013. The results consistently concluded that the inflation threshold is about 7 percent, which means inflation will be detrimental to economic growth if inflation rate exceeds 7 percent. Therefore, the policy-makers in Vietnam need to define a target inflation rate lower than this level to stabilize economic growth. The results also indicated that the Government should increase investment as well as enhance the effectiveness of investment to foster economic growth. Finally, Vietnam should stabilize trade balance to favor economic growth in long term.

The main determinant of a country's economic condition is economic growth. The analysis used in this study is Ordinary Least Square (OLS) regression analysis and aims to determine how the influence of the money supply (JUB), inflation (INF), and interest rates (BIRATE) on Indonesia's economic growth for the period 2002 to 2021. Inflation, the money supply, and interest rates are independent variables in this study, while economic growth is the dependent variable. The results showed that inflation had no effect on economic growth. The money supply variable has a positive effect on economic growth while the interest rate has a negative effect on economic growth.

The objective of this study is to offer an empirical valuation of the relationship between external debt and economic growth in the Western Balkan (WB) countries, focusing specifically on the countries like Albania, Kosovo and North Macedonia, combined with other WB countries like Bosnia and Herzegovina, Montenegro and Serbia. The empirical model provides the impact of external debt and other control variables like total investments, population growth, inflation, literacy ratio, trade openness on economic growth in the Western Balkan countries, using a panel level data for 6 Western Balkan countries, covering a yearly time span: 2000-2022. Different estimation methodologies like Fixed Effects with Driscol and Kraay standard errors, robust LSDV and GMM estimates, were employed for the purpose of the research. The findings of the research confirm growth-deteriorating effect of external debt for target group of countries like Albania, Kosovo and North Macedonia and growth enhancement effect of external debt for the second group of countries like Bosnia and Herzegovina, Montenegro and Serbia. Other control variables like total investments, trade openness, inflation and population growth are found as crucial factors on explaining growth performance of the WB countries. In addition, COVID-19 interacted with external debt and financial crisis interacted with external debt, appears as crucial factors explaining growth pattern of the WB countries.

This paper empirically investigated the relationships among money supply, government revenue, government expenditure, domestic debt, external debt, inflation rate, exchange rate and balance of trade in Nigeria based on time series data which spanned between 1981 and 2017. The data were sourced from Central Bank of Nigeria Statistical Bulletin publications of various issues and National Bureau of Statistics. The data were tested for stationarity using Augumented Dickey Fuller unit root test and Phillips-Perron unit root test while the co-integration test was conducted using Johansen’s methodology. Ordinary Least Square (OLS) estimating technique was used for the empirical analysis. The findings revealed that both the explanatory variables and the dependent variable have long run equilibrium relationship. The results further demonstrated that government revenue (GREV), government expenditure (GEXP), exchange rate (EXGR) and inflation rate (INFR) have statistically significant positive relationships with balance of trade (BOT) while money supply (MS), domestic debt (DDEBT) and external debt (EDEBT) exert statistically significant negative impact on balance of trade (BOT) in Nigeria. Based on the results, government at all levels should ensure implementation of monetary and fiscal policies’ instruments aimed at promoting favorable investment atmosphere through appropriate stabilization of interest rates, exchange rates and inflation rates in order to galvanize economic growth, economic stability, economic sustainability and favorable balance of trade; there should be promotion of exportation of Nigerian products by the government especially non-oil products in order to bring more foreign exchange earning into the country, boost productive activities and improve the balance of trade position of the country. In addition, government should ensure that loans borrowed from domestic and external sources are judiciously expended on productive activities in order to positively influence balance of trade; and there should be imposition of ban on importation of products that can be manufactured domestically so as to expand productive capacity of indigenous industries and ensure favorable balance of trade. Finally, different tiers of government should invest massively on critical infrastructure in the economy to boost local investment in productive activities, thus galvanizing balance of trade. Keywords: Monetary Policy, Fiscal Policy, Balance of Trade, Unit Root Test, Co-integration Test, Ordinary Least Squares, Nigeria DOI : 10.7176/JPID/50-07 Publication date :June 30 th 2019

In a complex and volatile economic environment, the stability and sustainability of economic growth have always been the focus of attention for Governments and economists. Economic growth is not only a matter of national prosperity and stability, but also has a direct impact on the quality of life of the population and the overall well-being of society. However, the process of economic growth is often influenced by a variety of factors, among which inflation and money supply are two crucial economic variables. This paper selects the relevant data of China's consumer price index CPI, broad money and quasi-money supply M2 and gross domestic product GDP from 2003 to 2022 as the corresponding variable indicators, constructs the multiple linear regression model, and conducts the significance test for the model through statistical inference test, econometrics test, and other methods and makes relevant corrections to the model, and then arrives at the optimal model. The analysis shows that there is a close relationship between inflation and money supply, and inflation is an important factor driving China's economic growth, while changes in money supply have a relatively small impact on China's economic growth, and in the long run, inflation has a significant negative impact on economic growth, while money supply has a significant positive impact on economic growth.

The effect of money supply in enhancing economic growth in Nigeria and Ghana is investigated in this study. The major objectives of the study are to establish the joint and individual influences of money supply mechanisms on economic growth in Nigeria and Ghana. The study employs data from 2009 to 2018 and uses Ordinary Least Squares regression technique for analysis of the data. The findings reveal that broad money supply (M2) has an insignificant negative influence on RGDP in Nigeria, but in Ghana the impact is significant and positive. Broad money supply (M3) exerts insignificant positive influence on RGDP in Nigeria, but significant negative impact on RGDP in Ghana while credit to private sectors (CPS) has insignificant positive influence on RGDP in both Nigeria and Ghana. The study among others suggests that the Monetary Authorities in the two countries should come up with monetary policy strategies that will help drive the economy better and such policies should consider M2 and CPS more as their contributions are necessary for economic expansion that lead to more output and employment.

The paper examines the impact of money supply in determining the exchange rate of the currency with respect to fixed and flexible exchange rate policies in Nigeria. Time series data, sourced from Central Bank of Nigeria (CBN) was used. Money supply (MS) was decomposed to include Narrow Money Supply (M1), quasi money (Qm) and Broad Money Supply (M2). Econometric analysis based on the least squares procedure was conducted using E-View Version 7. Descriptive analysis was also carried out. It was found from the study that periods of floating exchange rate policy have influenced exchange rate positively even to a great extent and that quasi money showed a negative and significant sign on exchange rate, while narrow money exhibits a positive sign. Broad money supply indicates that expansionary monetary policy tends to diminish the Naira/ Dollar value. It is therefore recommended among others, that the Nigerian financial market in general and money market in particular should be strengthened in both depth and breath. The available money outside the banking system should be properly channelled for productive purposes in order to achieve the desired stability in the naira exchange rate and by extension growth in the Nigerian economy.