Inflation and Fiscal Deficit in Sub-Saharan Africa

ABSTRACT

The purpose of this article is to determine and analyze the factors that influenced inflation and fiscal deficit in Sub – Saharan Africa countries (SSA) from existence of literatures. The study has found that Exchange rate, Money growth, Depreciation of currency and Fiscal deficit, Political Stability, Trade shocks, rising food prices, and oil prices are the reasons of inflation in SSA countries. Inflation and unemployment can affect just 15.6 percent of GDP in SSA. The results have shown the less percentage among these two factors on GDP. On the other hand, the has analyzed the effect of inflation on GDP, which showed positive but weak relationship. If inflation changes by one percent, GDP will change just 0.245 percent and if unemployment rate increase by 100 percent then the GDP will increase on 0.23 percent. Further more there is no any meaningful usage of Philips Curve in SSA, Unemployment had a positive effect on GDP, it means whenever the unemployment rate was more the inflation rate was more too, and there is a positive effect of inflation on GDP growth rate but a very less effect.

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