Dynamic Effects of External Shocks on Malawi's inflation

The study contributes in the modelling of inflation in Malawi by including external shocks variables which have been ignored by most previous studies. Using the autoregressive distributed lag model the study reveals that South Africa's inflation and the exchange rate play a significant role in the long run inflationary process in Malawi. It was also revealed that the exchange rate was the single most important source of imported inflation. The study suggests that monetary authorities in Malawi should consider adopting inflation targeting which has been successful in fighting inflation in South Africa, its major trading partner.

Autorentext

The author is monetary/health economist lecturing at Blantyre International University. He holds a masters degree in Economics from University of Malawi and has experience in poverty and vulnerability assessment, facilitating data analysis trainings, and developing business plans.