Exchange rates, petroleum prices and price determination in Sierra Leone

The Sierra Leone economy is a net importer with a chronic negative balance of trade and imports as a percentage of GDP averaged 40.75 per cent between 2001 and 2010. This study determined the effects of monetary environment, exchange rate movement and petroleum prices on domestic prices in Sierra Leone by estimating a hybrid model of inflation. The empirical results showed that petroleum product prices, exchange rate as well as monetary factors determined inflation in Sierra Leone and that the contribution of petroleum prices was unfounded in the long run, meaning it was only a short run phenomenon.Keywords: Sierra Leone, Inflation, Pump price, Exchange rate.JEL Classification Codes: C13, E31, E51, O55