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Dynamics of Inflation and Remittances on Economic Growth in Liberia: A Granger Causality Approach

Received: 3 February 2022     Accepted: 18 February 2022     Published: 25 February 2022
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Abstract

Inflation and economic growth relationship remain an extensive theoretical and empirical debate in developing countries with regards to monetary policy. The study examines the nexus among economic growth, remittance and inflation in Liberia. The study employed the Granger Causality test to identify if changes in variable of interest temporally precede changes in another, was considered. The VECM specification and result shows a cointegrating equation which indicate a statistically significant long run relationship. The second lag of GDP is positively affecting economic growth significantly. Lag one of inflation showed a significant and positive relation with GDP, hence inflation positively affect economic growth. The result of the VEC Granger Causality/Block exogeneity Wald tests below show Inflation Granger causes GDP in Liberia which is consistent with our ECM result. The result also showed remittance Granger cause GDP in Liberia while inflation Granger causes remittance in the Liberian economy. In conclusion, the study shows that inflation and remit granger caused GDP at a significant level and inflation granger cause remit, hence there is unidirectional causality from inflation to GDP, and from inflation to remit in Liberia.

Published in International Journal of Business and Economics Research (Volume 11, Issue 1)
DOI 10.11648/j.ijber.20221101.16
Page(s) 49-53
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2022. Published by Science Publishing Group

Keywords

Granger Causality, Inflation, Remittances

References
[1] Adaramola, A and Dada, O. (2020) “Impact of inflation on economic growth: evidence from Nigeria. Investment Management and Financial Innovations, 17 (2), 1-13.
[2] Anochiwa, L. I., & Maduka, A. (2015). Inflation and economic growth in Nigeria: empirical evidence? Journal of Economics and Sustainable Development, 6 (20), 113-121.
[3] Bellepea, G. W. (2009) Inflation and economic growth: evidence from Liberia. Retrieve from: http://erepository.uonbi.ac.ke
[4] Bose, E., Hravnak, M., and Sereika, S. (2018) Vector Autoregressive (VAR) Models and Granger Causality in Time Series Analysis in Nursing Research: Dynamic Changes Among Vital Signs Prior to Cardiorespiratory Instability Events as an Example. US National Library of medicine. National Institute of Health.
[5] Charemza, W. W. and. Deadman, D. F (1997) “New Directions in Econometric Practice: General to Specific Modelling, Cointegration and Vector Autoregression,” Edward Elgar Publishers, Cheltenham.
[6] Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, pages 424–438.
[7] International Labour Organization (2017). Employment and unemployment. International Labour Organization.
[8] Irge, T. W. (2020) Analysis of impact of inflation and economic growth on unemployment in Ethiopia. International journal of current research. Vol. 12 issue 07, pp 12600-12608.
[9] Lütkepohl H. (2005) New introduction to multiple time series analysis. Berlin, Germany: Springer Berlin Heidelberg.
[10] Seleteng, M., Bittencourt, M. and van Eyden, R. (2013), “Non-linearities in Inflation-Growth Nexus in the SADC Region: Panel Smooth Transition Regression Approach”, Economic Modelling, 30, 149-156.
[11] Shojaie, A. and Fox, E. B. (2021) Granger Causality: A Review and Recent Advances.
[12] Umaru, A., & Zubairu, A. A. (2012). Effect of inflation on the growth and development of the Nigerian economy (an empirical analysis). International Journal of Business and Social Science, 3 (10), 183-191.
[13] United Nations COMTRADE database, 2022.
[14] World Bank (2022) Remittance Inflows to GDP for Liberia. Retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DDOI11LRA156NWDB.
[15] World Bank Report (2021) inflation, consumer prices (annual percentage). http://data.worldbank.org.
[16] Gujarati, D. N. (2004) Basic econometrics. Fourth edition. The McGraw−Hill.
Cite This Article
  • APA Style

    Lester Zomatic Tenny. (2022). Dynamics of Inflation and Remittances on Economic Growth in Liberia: A Granger Causality Approach. International Journal of Business and Economics Research, 11(1), 49-53. https://doi.org/10.11648/j.ijber.20221101.16

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    ACS Style

    Lester Zomatic Tenny. Dynamics of Inflation and Remittances on Economic Growth in Liberia: A Granger Causality Approach. Int. J. Bus. Econ. Res. 2022, 11(1), 49-53. doi: 10.11648/j.ijber.20221101.16

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    AMA Style

    Lester Zomatic Tenny. Dynamics of Inflation and Remittances on Economic Growth in Liberia: A Granger Causality Approach. Int J Bus Econ Res. 2022;11(1):49-53. doi: 10.11648/j.ijber.20221101.16

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  • @article{10.11648/j.ijber.20221101.16,
      author = {Lester Zomatic Tenny},
      title = {Dynamics of Inflation and Remittances on Economic Growth in Liberia: A Granger Causality Approach},
      journal = {International Journal of Business and Economics Research},
      volume = {11},
      number = {1},
      pages = {49-53},
      doi = {10.11648/j.ijber.20221101.16},
      url = {https://doi.org/10.11648/j.ijber.20221101.16},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20221101.16},
      abstract = {Inflation and economic growth relationship remain an extensive theoretical and empirical debate in developing countries with regards to monetary policy. The study examines the nexus among economic growth, remittance and inflation in Liberia. The study employed the Granger Causality test to identify if changes in variable of interest temporally precede changes in another, was considered. The VECM specification and result shows a cointegrating equation which indicate a statistically significant long run relationship. The second lag of GDP is positively affecting economic growth significantly. Lag one of inflation showed a significant and positive relation with GDP, hence inflation positively affect economic growth. The result of the VEC Granger Causality/Block exogeneity Wald tests below show Inflation Granger causes GDP in Liberia which is consistent with our ECM result. The result also showed remittance Granger cause GDP in Liberia while inflation Granger causes remittance in the Liberian economy. In conclusion, the study shows that inflation and remit granger caused GDP at a significant level and inflation granger cause remit, hence there is unidirectional causality from inflation to GDP, and from inflation to remit in Liberia.},
     year = {2022}
    }
    

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    T1  - Dynamics of Inflation and Remittances on Economic Growth in Liberia: A Granger Causality Approach
    AU  - Lester Zomatic Tenny
    Y1  - 2022/02/25
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    DO  - 10.11648/j.ijber.20221101.16
    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
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    UR  - https://doi.org/10.11648/j.ijber.20221101.16
    AB  - Inflation and economic growth relationship remain an extensive theoretical and empirical debate in developing countries with regards to monetary policy. The study examines the nexus among economic growth, remittance and inflation in Liberia. The study employed the Granger Causality test to identify if changes in variable of interest temporally precede changes in another, was considered. The VECM specification and result shows a cointegrating equation which indicate a statistically significant long run relationship. The second lag of GDP is positively affecting economic growth significantly. Lag one of inflation showed a significant and positive relation with GDP, hence inflation positively affect economic growth. The result of the VEC Granger Causality/Block exogeneity Wald tests below show Inflation Granger causes GDP in Liberia which is consistent with our ECM result. The result also showed remittance Granger cause GDP in Liberia while inflation Granger causes remittance in the Liberian economy. In conclusion, the study shows that inflation and remit granger caused GDP at a significant level and inflation granger cause remit, hence there is unidirectional causality from inflation to GDP, and from inflation to remit in Liberia.
    VL  - 11
    IS  - 1
    ER  - 

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Author Information
  • School of Business, University of Liberia, Monrovia, Liberia

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