The Inflation – Economic Growth Nexus in Ethiopia

Course ID
Ethiopian Economics Association (EEA)
Aynalem Shita

In this study the relationship between inflation and economic growth in Ethiopia is examined. Moreover, the study explores the threshold level of inflation for the healthy functioning of the Ethiopian economy Co‐integration and error correction models were employed accompanied by correlation matrix and Granger Causality test using annual data set on real GDP and CPI data for the period of 1974/75 to 2009/10 from MoFED, NBE and CSA. The empirical evidence demonstrates the existence of a statistically significant long and shortrun negative relationship between inflation and economic growth in Ethiopia. Moreover, it is also found a 4‐percent threshold level (i.e., structural break point) inflation rate above which inflation would likely to adversely affect economic growth. Therefore, controlling moderate inflation should be the main goal for policymakers in Ethiopia.

Corporate Author:Getnet Alemu, Worku Gebeyehu , Demirew Getachew (Editors) & Ethiopian Economic Association (EEA)
Publisher:Ethiopian Economic Association (EEA)
Primary Descriptors:Economic Growth

Secondary Descriptor:Threshold level of Inflation

Geographic Descriptors:Ethiopia
Cataloge Date:03/11/2015
Broad Subject heading:Inflation – Ethiopia
Call Number:330.963 PRO 2014
Serial Key Title:Proceedings of the Eleventh International Conference on the Ethiopian Economy
Publication catagory:International Conference
Content type:EEA Publication
Publication date:2014-06-02 00:00:00
Forum or Discussion date:2013-07-17 00:00:00
Place of publication:Addis Ababa, Ethiopia
Type of material:Book
Current frequency:Annually
Author: Aynalem Shita