Critical Analysis of the Role of Central Bank in Curbing Inflation Rates in Somaliland

Abstract

This research was conducted to evaluate the role of central bank in curbing inflation rates in Somaliland. The objectives of this research were to determine how exchange rate stability helps curbing inflation rate, to investigate how control of money supply helps curbs inflation rates and to analyze other methods used by central bank in curbing inflation rates in Somaliland. The study has used the post Keynesian theory and monetary theory in explaining the behavior of inflation. The empirical review was guided by the objectives of the study. This study employed descriptive research design and was used a structured questionnaire to gather data. The target population of the study was comprised of 357 employees of Central Bank. A sample of 108 employees was selected from the population using stratified random sampling technique. Reliability of the instruments was tested by the Cronbach’s alpha. Data was analyzed by aid of Statistical Package for Social Science (SPSS) and was presented by tables and charts. It was concluded that both money supply and exchange rate in Somaliland were good explanatory variables in explaining the changes in inflation on Somaliland economy. So it needs central bank to regulate these two variables effectively and efficiency in order to decrease the inflation rates. It was recommended that central bank should have to set a detailed plan of action with clear and transparent monetary policy objectives and also develop the ways, methods and techniques that can used to achieve these objectives. This can be used as a benchmark for measuring the progress and performance of the central bank achievements for both the government and the general public.