LIST OF ABBREVIATIONS
CPI : Consumer Price Index
ECB : European Central Bank
ECOSTATS: Economic Statistics
EICV : « Enquêtes Intégrale sur les
Conditions de Vie des Ménages au Rwanda »
FRB : Federal Reserve Board
GDP : Gross Domestic Product
IBR : International Business Research
ILO : International Labor Office
IMF : International Monetary Fund
LOG : Logarithm
NBR : National Bank of Rwanda
NISR : National Institute of Statistics of Rwanda
SPSS : Statistical Package for the Social Sciences
LIST OF TABLES & GRAPHS
TABLES
Table 1 : Inflation by region (Annual % change)
Table 2 : Evolution of CPI, M2, Real GDP, Exchange rate and
Lending rate (1990-2009)
GRAPHS
Graph 1 : Trends in Consumer Price Index and Money Supply,
1990-2009
Graph 2 : Trends in Consumer Price Index and Gross Domestic
Product, 1990-2009
Graph 3 : Trends in Consumer Price Index and Exchange rate,
1990-2009
Graph 4 : Trends in Consumer Price Index and Lending rate,
1990-2009
CHAPTER ONE: INTRODUCTION
1.1 Background
Inflation constitutes one of the major economic problems in
emerging market economies that requires monetary authorities to elaborate tools
and policies to prevent high volatility in prices and long periods of
inflation.
Based on the statistics released by International Monetary
Fund (IMF), in industrialized countries, inflation has generally been
controlled. Inflation, measured by the change in the Consumer Prices Index
(CPI), declined steadily, reaching 1.5% in 1998, the lowest rate recorded since
1990, after 2.1% in 1997, 2.7% in 1996 and 2.6% in 1995 (IMF, 1999:180).
Regarding developing countries, the same statistics mentioned
above shows that inflation has fallen sharply since 1995, recording rates of
22.1% and 14.6% respectively in 1995 and 1996 against 47.5% in 1993 and 51.8%
in 1994. During 1997, inflation has fallen sharply again to 9.2% and then
increased to 10.3% in 1998. In Asia the rate of inflation fell to 4.8% in 1997
against 8.2% in 1996 while in Africa, he settled in less than half of the new
1996 (11.1% in 1997 against 25.9% in 1996) due to reforms and macroeconomic
stabilization policies implemented in the country market. In 1998, inflation
was reduced to 8.7% in Africa, while in Asia it rose again to 8.0% on the trace
of the crisis that rocked the continent.
In sub-Saharan Africa, the inflation rate was 13.7% and 10.3%
respectively in 1997 and 1998 against 32.3% in 1996.
After the years of double-digit inflation in 1990-95 and
predominantly high inflation in 1996-2000, global rates fell to less than 5% in
2000-05. The most marked decreases were recorded in the transition countries,
and the most stable, continuously low and decreasing inflation was recorded in
the developed countries (ILO 2005:32).
The financial crisis which occurred in the United States in
the second half of 2006 and became acute in 2008 continues to affect seriously
the world economic outlook. In USA, inflation was 3.8% on average at the
end of the year 2008 against 2.9% recorded in 2007 then declined by 0.3% in
2009. In the Euro Zone, harmonized inflation was 3.3% while it was 2.1% in
2007. The last estimates of the International Monetary Fund (IMF) highlight a
world economic growth rate of 3.2% at the end of 2008 against 5.2% recorded in
2007 and stood at 0.3% in 2009. (NBR, 2009:15)
The following table shows annual percentage change of
inflation by region of the recent years from 2005 to 2009
Table 1: Inflation by region (annual %
change)
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