Macroeconomic Determinants of Inflation in Ethiopia: ARDL Approach to Cointegration

Maintaining inflation rate at optimal level is among important mechanism of balancing macroeconomic volatility to ensure steady economic growth. This study aims examine macroeconomic determinants in Ethiopia. The employed ARDL model using annual data for period 1981–2020. bound test was applied the presence con-integration between and independent variables. also uses augmented Dickey-Fuller and Phillips-Perron unit root tests check stationarity result reveals that almost all variables become stationary after first difference. Accordingly, from indicated existence long run relationship dependent variable explanatory entered into model. estimated error correction (ECM) with −0.53 coefficient confirms co-integration with high speed adjustment towards equilibrium. In run: real GDP, effective exchange rate, lending interest are positive significant whereas broad money supply, population growth, gross national saving previous year imports found be short drivers inflation. finding recommends, others, measures on reducing utilizing supply productive activities along side should be designed contain