Effect of Exchange Rate on Inflation in Sudan During the Period (1993- 2016)

Abstract

Abstract The study tackled the effect of exchange rate on inflation in Sudan during the period (1993-2016), the study aimed to estimate the effect of exchange rate on inflation, whereas the problem of study has acted in the continuous fluctuation for the exchange rate which, was led to instability in the standard of general prices. The study assumed that there is statistical significant relation between exchange rate and inflation. Importance of the study came for achievement to actual results to help the researchers in the same field, and support the economic decision makers. The study has followed the descriptive and analytical approach in order to describe and analyze the study's data, as well as using the economic analysis program (E-Views) that of processing instability problem, where the data of exchange rate and inflation have been stabled in the second difference and the level consequently. The studv has achieved manv results as follow: -The increasing in exchange rate by one unit led to increase the Inflation rate with (0.348801) which matches with the economic theory. - Statistical significant relationship between the exchange rate and the Inflation is found which has explained the strong and importance of the model. -The increase in the price level could have been because of local currency value decreasing versus the foreign currency.

The study recommended the following: -Necessity of supporting the production sectors in order to increase the exports volume which leads to increase foreign currency supply, hence the local currency value is appreciated. -Rational monetary policy must be followed in aspect of making balance between the demand and supply of money. - Creation of equal economic power in the market to control the general prices level for goods and services. Keywords: Appreciation, Depreciation, Fluctuations, Currency, Prices