Impact of Remittance (private individual transfer) on inflation in Ethiopia

Abstract

Like Many developing countries Remittance are large capital inflows in Ethiopia in recent years. Hence understanding the impact of remittance on Macro variables such as inflation is essential for the policy makers of recipient Economy. Incorporating remittance as exogenous variable to the standard inflation function, this paper verifies how it affects the inflation rate in Ethiopia in the 1991 quarter one to 2014 quarter four periods. Applying Vector Autoregressive technique remittance positively affects the price level in the short run. Where us there is no long run causation between these two variables.