Causes of Inflation

RESEARCH METHODOLOGY

1. RESEARCH DESIGN
According to Grinnell and Williams (1990), a research design is a systematic study
or investigation in some field of knowledge, undertaken to establish some facts or
principles. The ultimate purpose is to show the process of research so as to get
answer to the research objectives.
The nature of the research is analytical since it seeks to explain the relationship
between the inflation rates to money supply and the exchange rate. The type of
investigation is co-relational, as it tried to
observe whether the money supply and the exchange rate have impact on inflation
rate. This was achieved by showing the existence, strength and significance of
relation. The study concerns the developing countries especially Rwanda.
This study used secondary data on Rwanda’s inflation rates, the
money supply and the exchange rate: USD/FRW for the period 1995 to 2010.

2. SAMPLING DESIGN

2.1. STUDY POPULATION

Sample design that the study uses is non-probability sampling design,
which the researcher purposively selected the sample size from the
population, the population this study will consider is some of the
people in this district and those other who have related there is
more than 55,000 households in this district, there is no record of
the exact households of this district but as the Hargaisa Local
Government. Division of Ga’an Libah District estimate the
households of this district is more than 55,000.

3.2. Sample Size

Sample is the process of choosing members of a population to be
included in a sample, (Paul, 1997). Sampling is the process of
selecting elements from a population in such a way that the sample
elements selected represents the population, (Amin, 2005).
Table 3.1: Rule of thumb
While the previous rules of thumb are perfectly acceptable for most
basic surveys, sometimes you need to sound more “scientific” in
order to be taken seriously. In that case you can use the above table.
Simply choose the column that most closely matches your
population size. Then choose the row that matches the level of error
you’re willing to accept in the results. You will see on this table that
the smallest samples are still around 100, and the biggest sample (for
a population of more than 5000) is still around 1000. The same general principles
apply as before – if you plan to divide the results into lots of sub-groups, or the
decisions to be made are very important, you should pick a bigger sample.

4. DATA SOURCES
As stated above, this study had quantitative aspects. The quantitative data was
collected.
Researcher used secondary data using appropriate collection methods from
available different secondary sources in NBR especially by consulting different
reports related to the study.

5. DATA COLLECTION TECHNIQUES

A technique is defined as all resources and processes that enable researchers to
gather data and information on the research topic.

5.1. THE DOCUMENTARY TECHNIQUE

As a systematic search of all that is written related literature of the studied area
such as books, pamphlets, monographs, unpublished documents, reports, budgets,
public records etc. The documentary technique is the only one used along my
work. This technique allows us to choose among the books available what are
useful for our research and help to use the best resources.

6. RESEARCH METHODS
Contemporary English dictionary (1995: 927) defines methodology as a set of
methods and principles that are used when studying a particular subject or doing a
particular kind of work.
Methodology is the philosophy of research process, Bailey (1987:26). This
includes assumption and values that serve as rational for research and standards of
criteria the researcher uses for interpretation of data and reading conclusions.
The methodology is an intellectual process and an orderly system of arrangement
that enable one to search the aspects of knowledge. It is a conceptual process that
coordinates a set of investigation operations and techniques. One of the objectives
of research is to make sure on the validity of the economic theories by building an
econometric model.
The econometric method was used in this study. Because all models are inevitably
a simplification of reality, by which one seize the fundamental features of the
system to be studied.
Econometrics is interested in mathematical of statistical data concerning an
economic phenomenon. In our case, it is the treatment of three variables which is a
multiple regression.
The study entails a comparative method which will enable us to study the influence
of money supply and exchange rates on the inflation in Rwanda during the period
1995-2010.

7. DATA PROCESSING
After data collection, it was processed. The information related to the hypothesis
and objectives of the study was taken into account and transformed into
meaningful data for easy interpretation and understanding. To analyze and process
data, researcher grouped and processed them together in a variety of ways in order
to show the meaning and facilitate the interpretation and understanding.

7.1. EDITING
Kerliner (1964:140), editing is a process where errors in completed interview
schedules and other techniques used in data collection are identified and eliminated
whenever possible. Kolton and Moser (1979: 411) states that “editing survey is
intended to detect and as far as possible eliminates errors in obtained data from the
document. The major aim of editing is to discover mistakes made during the field
of the study and monitor the accuracy. Much of the data did not come from one
source. Indeed, different publications and reports had to be explored deeply. So,
the figures from the National Bank of Rwanda, other economic documents and
dissertations had to be properly arranged so as to allow the analysis to proceed.

7.2. TABULATION
Nachimias (1976: 126) define tabulation as putting data into some kind of
statistical tables such as percentage and frequency occurrence of response to
particular questions. The edited data was transformed into tables constructed
basing mainly on the variables considered under the study.
The data from NBR was then arranged into table format. This exercise allows for
comparison between different indicators at the same time period. Furthermore, it
becomes possible, thanks to tables, to have an idea of trends and their possible
causes in time series.

7.3. CODING
Manheim and Rich (1995: p005) define coding variables is the process of
translating attributes or properties of the world (i.e., variables) into a form that
researchers can systematically analyze.
The process entails devising a precise schema to account for the values that each
variable of interest can take and then methodically and physically assigning each
unit under study a value for every given variable. This was done to link the process
to the tabulation and illustrations.

8. DATA ANALYSIS
The data obtained has been analyzed using econometrics methodology. The money
supply and exchange rates of USD/FRWconstitute the independent variables and
inflation rates constitute the dependent variable. The researcher used the regression
to estimate the strength or weakness, extent, direction, correlation and significance
of the effect that exist between inflation rate and money supply and exchange rate.
The econometric method will be more useful in chapter four where the researcher
tested the data stationarity before estimating the model. The main objective is to
examine the effect of changes on inflation rates influenced by the changes in the
money supply and the exchange rates of US Dollar in Rwanda during the period
between 1998- 2010.
The researcher used the Augmented Dickey Fuller test for the unit root testing for
the purpose of analysis of the relationship between the variables of the model.
According to Gujarati (1999: 456-467), it is this test which detects the stationary of
variables. Many other tests will also be conducted. According to Gujarati, the test
for significance level will be done by using the t-test or individual test
(student statistic test). Also the researcher analyzed the long and short run relation
between the money supply and exchange rate of USD/FRW on inflation rate.
Many features of regression analysis will be interpreted, among which:
• The partial coefficient
• The coefficient of determination
• The student statistic test (t-test)
• The Akaike Information Criteria (AIC)
• The Schwarz Information Criteria (SIC)
The interpretation is done based on the above criteria after conducting different
test. Indeed, according to Kerlinger (1973: 134), interpretation takes the results of
analysis, makes inferences pertinent to the research relation studied and draws
conclusions
about relationship between the money supply and exchange rate of
USD/FRW on inflation rate.

8.1. COMPUTER PROGRAMS

The whole work of analyzing the data was done with the help of
computer programs. One search program that was used extensively
in the study as analysis tool is E-Views 3.1. The choice of EViews 3.1
program is constrained by the availability of programs and the
appropriateness to handle the task at hand. This program is chosen
because it is appropriate for this kind of research and can handle the
estimations envisaged.

References: -
SIBOMANA, J. J. (2011, October 30). THE CAUSES AND SOURCES OF INFLATION IN RWANDA.
Retrieved November 18, 2019, from
https://www.academia.edu/20530167/The_causes_of_Inflation_in_Rwanda._An_empirical_analysis
_of_infaltion_rates_on_Exchange_rate_Frw_USD_and_Money_supply_form_1995_to_2010.
Aden, M. M., Mohamed, M. A., & Nouh, R. A. (2016, August 30). THE IMPACT OF INFLATION ON
STANDARD OF LIVING. THE CASE OF GA’AN LIBAH DISTRICT OF HARGEISA,
SOMALILAND. Retrieved
November 18, 2019, from
https://www.academia.edu/32998980/THE_IMPACT_OF_INFLATION_ON_STANDARD_OF_LIVIN
G_T
HE_IMPACT_OF_INFLATION_ON_STANDARD_OF_LIVING._THE_CASE_OF_GAAN_LIBAH_D
ISTRICT_O
F_HARGEISA_SOMALILAND.