Relationship between Inflation and Economic Growth

Author

John, Tapiwa. Kelvin.

Title

Relationship between Inflation and Economic Growth

Abstract

The analysis explored the relationship between inflation and economic growth in Zimbabwe from 1992 to 2022. Ordinary Least Squares (OLS) regression analysis was employed to examine how inflation interacts with various macroeconomic variables obtained from World Development indicators. The analysis yielded evidence suggesting a statistically significant positive association between inflation and economic growth in Zimbabwe. The results indicate that lower inflation rates coincide with lower economic growth rates. This finding underscores the importance of addressing inflationary pressures. Inflation control measures should be implemented to reduce and to maintain demand within the economy, ultimately leading to lower inflation. As of supply side measures, enhancing the economy’s competitiveness and help moderate inflation pressures.Lastly, diversifying the economy beyond a limited number of sectors can bolster overall economic resilience and lessen vulnerability to external shocks that could exacerbate inflation. The insights gleaned from this research hold significant relevance for policymakers and scholars focused on fostering economic growth in Zimbabwe. Future research can delve deeper into the interplay between these factors and incorporate additional variables, such as manufacturing activity, foreign direct investment, and exports, and agriculture to create a more comprehensive understanding of Zimbabwe's economic dynamics. This investigation provides robust evidence of the inflation and economic growth nexus in Zimbabwe, highlighting the critical need for policymakers to adopt targeted policies to curb inflationary trends and stimulate sustainable economic growth. Based on the insights gleaned from this study, specific policy prescriptions were developed to address the inflation and economic growth conundrum in Zimbabwe, prioritizing measures that reduce inflationary pressure, enhance economic competitiveness and promote inclusive growth.

Date

June 2024

Publisher

BUSE

Keywords

Inflation

Economic

Supervisor

DR. Damiyano,