Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329382 
Year of Publication: 
2025
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 13 [Issue:] 4 [Article No.:] 102 [Year:] 2025 [Pages:] 1-18
Publisher: 
MDPI, Basel
Abstract: 
The annual inflation rate in Sri Lanka accelerated to record levels in recent years, especially after the COVID-19 pandemic. Though the inflation rate had declined to pre-pandemic levels by mid-2024, it is of great importance to identify the factors that caused hyperinflation during the COVID-19 pandemic. The objective of this study is to investigate the drivers of inflation in Sri Lanka using a structural vector autoregressive model and a multiple regression model. The study assesses both the global drivers and the domestic drivers of inflation. The study uses monthly data on the inflation rate, global oil price, exchange rate, policy rate, the global supply chain pressure index, and unemployment rate, covering the period from January 2020 to August 2024, focusing on the period of rapid increase in the inflation rate in Sri Lanka. The empirical results of the study provide evidence to conclude that the inflation rate in Sri Lanka during the 2020-2024 period was mainly driven by the growth rates in money supply, exchange rates, and global supply chain disruptions. The results also show that the volatility of the Sri Lanka inflation rate is mostly explained by the money supply and exchange rate movements in the long run.
Subjects: 
inflation
monetary policy
exchange rate
global oil price
Sri Lanka
JEL: 
E31
E52
F41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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