Examining the Causes and Nature of Inflation in Afghanistan During 2001–2015

Abstract

Inflation is one of the economic phenomena that affects various countries differently, with each facing unique challenges. Afghanistan, having experienced significant social and economic fluctuations and grappling with numerous economic challenges, has been particularly vulnerable to frequent price changes and fluctuations, incurring substantial costs as a result. Economic experts have attributed the causes and emergence of inflation to various factors, such as structural barriers, low productivity, uncontrolled growth of liquidity, improper monetary and fiscal policies, exchange rate fluctuations and trade shocks, consumerism, instability and uncertainty, and high population growth. Given the impacts and consequences of inflation on areas such as production, distribution, and overall societal welfare, it has consistently drawn the attention of policymakers. This study, utilizing fuzzy causality method, examines the causes and nature of inflation in Afghanistan during the years 2001–2015. The results indicate that factors such as the rise in the price index of imported goods, instability and uncertainty, monopolization, the increase in exchange rates, dollarization of the economy, and rising housing demand have played the most significant roles in driving inflation in the country.