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What Drives Inflation in High-inflation Countries? Evidence from Haiti, Sudan, Türkiye and Zambia

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  • Mehmet Mucuk
  • Sümeyra Evren

Abstract

The main purpose of this paper is to investigate the long-term effects of money supply, economic growth, interest rate, exchange rate, domestic credits and the oil price on inflation in Haiti, Sudan, Türkiye and Zambia, which are among the world's highest-inflation countries according to 2021 data. For this purpose, a panel cointegration approach is applied where fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) techniques are employed to explore the long-term effects with the help of annual data for the period 2000-2019. Also, the Dumitrescu and Hurlin panel causality test is used to determine whether there is a causality from these variables to inflation. The empirical findings show that there is a long-term relationship among these variables for the whole panel. The consequences from the FMOLS and DOLS estimates show that (i) money supply has a positive effect on inflation, (ii) economic growth affects inflation positively, (iii) an in- crease in the exchange rate causes inflation to rise, (iv) the oil price affects inflation positively, (v) interest rate affects inflation negatively, and (vi) domestic credits have a negative effect on inflation. In this context, we find that the exchange rate is the variable that has the greatest effect on inflation. Moreover, the findings of the panel causality test suggest that there is a causal relationship from money supply, economic growth, exchange rate and the oil price to inflation.

Suggested Citation

  • Mehmet Mucuk & Sümeyra Evren, 2023. "What Drives Inflation in High-inflation Countries? Evidence from Haiti, Sudan, Türkiye and Zambia," Politická ekonomie, Prague University of Economics and Business, vol. 2023(3), pages 238-266.
    • Handle: RePEc:prg:jnlpol:v:2023:y:2023:i:3:id:1385:p:238-266
    DOI: 10.18267/j.polek.1385
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    More about this item

    Keywords

    Inflation; money supply; economic growth; interest rate; exchange rate; domestic credits; oil price;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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