Inflation Determinants In Cambodia

In this research, I apply the empirical work of time series data from1993to2013which are extracted from ADB and IMF to find out the inflation determinants in Cambodia and to reveal the most influential determinant. OLS regression method is employed to analyze my research model. The empirical results based on broad money supply, exchange rate, government expenditure, economic openness, and world crude oil price provide a good description of inflation phenomenon in Cambodia during the period under analysis. All the explanatory variables are significant and have the expected signs, which are consistent with theory and other empirical findings.The empirical results demonstrate that broad money supply, government expenditure, exchange rate, and world crude oil price have a positive impact on inflation while economic openness negatively affects inflation rate in the case of Cambodia. Inflation in Cambodia is affected by both demand-pull and cost-push factors. The results of standardized coefficients of inflation determinants in Cambodia reveal that broad money supply is the most important and influential factor to explain the positive impact on inflation, following by government expenditure, exchange rate, and world crude oil price. It is reflected that inflation is more affected by monetary phenomenon (M2) and demand-pull factors seem to be more influential than cost-push factors to cause inflationary pressure in Cambodia during my research period. Both monetary and fiscal policy, which need well cooperative participation between NBC and MEF, are applied to curb the inflationary effect in Cambodia.