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Analyzing the relationship between money supply and inflation In the Syrian economy during (1996-2010)

تحليل العلاقة بَيْنَ التَّضخُّم و عَرْضِ النُّقود في الاقتصاد السُّوري خلال الفترة (2010 - 1996)

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 Publication date 2014
and research's language is العربية
 Created by Shamra Editor




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The purpose of this research is to explain the impact of money supply on inflation in the Syrian economy by using cointegration and causality test as a method during (1996 – 2010). The results of this research has showed that there is no causality relation runs from the money supply into inflation indicator. In addition, here is no long run effect between the Consumer price index and the inflation in Syria as Johansson’s Co-integration Test has showed.

References used
Dickey, D. and Fuller, W (1981) likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometric Vol.49 No, 4. Pp1057-1072
Jon ,H.G. ,Essays in monetary Economics, George Allen &un win, Ltd, London, 1969, 2nd Ed
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The inflation is considered a great challenge to the economy of the most countries in the world, and that is because of its negative effects of the economic growth rate. This study investigates the impact of cost of production on the inflation in Syr ian Arab Republic during the period (1996-2010) by using modern standard ways. The results of this study showed that the reasons for increasing the inflation rate in Syrian economy are domestic intermediate goods and intermediate imported goods. Regression analysis has been used to estimate the effects of the output of the real wage and the cost of production on GDP implicit price deflator. It has been concluded that the cost of production affects the implicit price deflator at significance level less than 0.05.
The study was conducted in the eastern region of Syria to know the extent of cultivation development of wheat and cotton production and the factors affecting these crops during 1996-2010. The results showed that the effect of time on the productio n and productivity of wheat was not changed statistically, while the cotton area was decreased significantly during the study period. The total production of wheat was also affected significantly and positively by cultivated area and planting costs per hectare, and negatively by purchase price, while the production of cotton was affected significantly and positively by costs and purchase prices. According to the geographical region, the results showed that the production in the eastern region was significantly affected by Al-Raqqa production for wheat and cotton crops and Al-Hassake production for wheat crop. However, wheat productivity at Deir Ezzor was significantly superior compared to Al-Raqqa and Al-Hassake. The study recommended expanding the cultivation of wheat and cotton and support and expand the role of agricultural extension.
This research investigates the main factors (domestic and foreign) affecting inflation rate in Syria. Choosing the factors is based on the analysis of the major economic hypothesis concerning inflation determinants such as: excess purchasing power, cost push inflation, foreign inflation. By using OLS method, we find long run function, and it shows that the excess purchasing power has no significant effect on inflation rate. The error correction model shows that high cost rate has the biggest effect on inflation rate in the short run.
The recession or the stopping of the growth accompanied with an increase in the rate of the inflation is considered as one of the damaging situations of the economy and has also been defined as inflation accompanied by an increase in the rate of un employment and it is used to be an obstacle to the calculations of the policy makers because of its negative consequences on the economy, particularly because of the damage on the expenditure and pushing of the demand backwards. It is believed that the British politician Pan MacLoid is the first person to form the idiom in the speech of the parliament in 1965 when he said that we had an inflation situation on one side and a stopping of the development on the other side, so we were suffering from an inflationary recession. Because of the importance of this phenomenon, the study aims to prove the existence of the inflationary recession phenomenon in the Syrian economy, which doesn’t reach to the level of the entire employment through the collecting of data about this economy during a specific period and analyzing them in order to monitor the indexes and the effects of the recession and the inflation in the Syrian economy during the same period and reveal the role of the government in the emergence of the inflationary recession as a result of the economic, financial and monetary policies followed by the government as well and reveal the procedures which they must follow to remove of the contradiction among the governmental policies to treat the inflationary recession phenomenon, to activate the national economy and to increase the rate of development of the entire local production as well as to reduce the unemployment rates.
This research studies inflation and its reasons in the Syrian economy using (1990-2010) data, also it studies imported inflation and its reflects on inflation rates, considering that the imported inflation is one of the major drivers of inflation in transitioning economies. We find that the imported inflation has a significant effect on inflation rate, and it leads – beside endogenous factors – to high inflation rates. Hence, there must be coordination among economic policies to achieve the balance between money market and commodities market, in addition to the optimal use of the potential sources, thus less import.
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