International Commodity Prices and Inflation Dynamics in Sierra Leone
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Date
2020-08-05
Authors
Danladi, Jonathan D.
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research consortium
Abstract
This study examines the impact of international commodity price changes,
measured in local currency, on consumer prices in Sierra Leone. Monthly data
from January 2007 to August 2016 are used to examine the long-run relationship
and the short-run dynamics. The study finds the dynamics of cocoa, oil, and
rice prices as significant determinants of domestic consumer prices both
in the long-run and the short-run. Domestic consumer prices are shown to
respond negatively to rising cocoa prices, one of the country’s major export
commodities. The study suggests deliberate efforts on the part of authorities
for the improvement and expansion of production base of the country’s export
commodities such as cocoa and rice, which the country has comparative advantage, to
reduce the pressure on the local currency and the prevalent upward trend of consumer
prices. A diversified energy source and an active production sector can reduce the
overdependence on oil and ultimately, the direct pass-through of commodity price
fluctuations to consumer prices in the economy.