Causes of Inflation in the Sudan, 1970-1991

Since the early 1970s Sudan has experienced double digit inflation rates. The officially calculated rate of inflation rose from zero percent in 1971 to 24.6 percent in 1981 and 123.6 percent in 1991. The present paper attempts to identify the sources of inflation in Sudan by specifying and estimating a simultaneous equations model using two-stage least squares procedures from annual data for the period 1971-1991. The empirical results suggest that while government borrowing from the banking sector and imported inflation played a significant role in fuelling domestic inflation, the continuous depreciation of the free market exchange rate was the most significant single variable contributing to inflation in Sudan. This rate was significantly influenced by the expansion of credit facilities to the private sector, which were mostly used for speculative purposes in the foreign exchange markets. App., bibliogr.

Title: Causes of Inflation in the Sudan, 1970-1991
Authors: Mahran, Hatim A.
Gangi, Yagoub A.
Year: 1996
Periodical: Eastern Africa Social Science Research Review
Volume: 12
Issue: 2
Period: June
Pages: 13-23
Language: English
Notes: biblio. refs.
Geographic terms: Sudan
Northeast Africa
Abstract: Since the early 1970s Sudan has experienced double digit inflation rates. The officially calculated rate of inflation rose from zero percent in 1971 to 24.6 percent in 1981 and 123.6 percent in 1991. The present paper attempts to identify the sources of inflation in Sudan by specifying and estimating a simultaneous equations model using two-stage least squares procedures from annual data for the period 1971-1991. The empirical results suggest that while government borrowing from the banking sector and imported inflation played a significant role in fuelling domestic inflation, the continuous depreciation of the free market exchange rate was the most significant single variable contributing to inflation in Sudan. This rate was significantly influenced by the expansion of credit facilities to the private sector, which were mostly used for speculative purposes in the foreign exchange markets. App., bibliogr.