Theoretically Proposed Policy Instrument to Resolve the Negative Effect of Inflation Flow Into a Positive Macroeconomic Growth: The Case of Sierra Leone Economy

Abstract

The paper empirically examines the predictive factor of the inflation rate observed to be the vector force of macroeconomic growth decline or rise in the Sierra Leone economy. Thereby adopting a statistical tool of an exogenous univariate auto-regression integrated moving average to build a forecasting model between the open-market-exchange rate and the inflation rate to establish the degree of correlation effect as a basis to theoretically prescribe a policy instrument, a means to maximize economic benefit for sustainable macroeconomic growth. This leads to an established finding that an average price shift of +/- 0.032 of the leone currency price with the US dollar at the open market will always cause a percentage point change of inflation to the endogenous economy when all other factors remain constant.