The Impact Of Inflation On Standard Of Living, The Case Of Hargeisa, Somaliland 6b2120

THE IMPACT OF INFLATION ON STANDARD OF LIVING. THE CASE OF GA’AN LIBAH DISTRICT OF HARGEISA, SOMALILAND. A Research Paper Submitted for the partial fulfillment of the requirements for the award of B.A Degree in Economics Under the Guidance of:

Mr. Zakaria Mousa

By: Mukhtar Mahdi Aden

5644/13

Mohamoud Abdi Mohamed

5590/13

Rahma Abdirashid Nouh

5613/13

as University (H M C) Department of Economics August 2016

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DECLARATION Hereby declare that this research paper is the result of our own work, except where Otherwise stated. We also declare that it has not been prepared previously or concurrently submitted as a Whole for any other degrees at as University or any other institutions. We also declare that this research is prepared by three different people, and share every effort, cost and work equally.

Name: Mukhtar Mahdi Aden Signature____________________ Name: Mohamoud Abdi Mohamed Signature____________________ Name: Rahma Abdirashiid Nouh Signature____________________

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DEDICATIONN

Mukhtar Mahdi Aden I dedicate this thesis paper to my Family specially my Father, Mahdi Aden Ismail who has been my biggest er all my life and who helped me begin my educational journey and me in anyway and I appreciate their motivation and endless effort to me, and my dear teacher and supervisor Zakaria Mouse also to anyone who helped, ed and encouraged me.

Mohamoud Abdi Mohamed I dedicate this thesis paper to my Family specially my MUM and DAD, and anyone who ever helped me on this paper.

Rahma Abdirashid Nouh I dedicate this thesis paper to my Family, my mum and my friends and classmates. And also dedicate this my dear teachers who helped me to get through this university career.

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ACKNOWDLEGEMENTS All praises and thanks are due to Allah (SWT) the creator, and the most merciful, who gave us the courage, endurance, willingness and ability to complete this paper successfully. Firs we would like to express my appreciation, thanks and extend my indebted gratitude to my genuine advisor, Mr. Zakaria mouse Mohamed without his valuable and constructive advice, patience, and rich contribution, this paper would not have succeeded. He encourages the development of this paper from the beginning and suggested throughout for improvement. Therefore this paper is the result of three persons. We want to thank him for his guidance not only for this paper but also for my future life. We would lastly, but not the last, like to thank and gratefully acknowledgement my teacher and also the head of the Economic Department Mr. Yimam D. Ali for his technical help and preparing the necessary facilities in our university career and the possibility to complete this research paper. Finally we would like to thank all the teachers who helped us to be better students and teach how to become someone else and use our knowledge as a weapon, and we would like to thank AS UNIVERSITY.

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APPROVAL SHEET This thesis entitled: The impact of Inflation on Standard of Living the case study of Ga’an Libah district of Hargeisa, Somaliland. Submitted by;

1. Mukhtar Mahdi Aden 2. Mohamoud Abdi Mohamed 3. Rahma Abdirashid Nouh In requirement for the degree of bachelor Economics, faculty of Economics, as University have been accepted. Supervisor: ………………………………… Signature: …………………………………. Date: ………………………………………

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Contents DECLARATION ............................................................................................................................................... ii DEDICATIONN .............................................................................................................................................. iii ACKNOWDLEGEMENTS ................................................................................................................................ iv APPROVAL SHEET .......................................................................................................................................... v LIST OF FIGURES AND TABLES ...................................................................................................................... ix LIST OF ABBREVIATIONS AND ACRONYMS ................................................................................................... x ABSTRACT..................................................................................................................................................... xi Chapter One: INTRODUCTION ...................................................................................................................... 1 1.1 Background of the study ..................................................................................................................... 1 1.2 Problem statement ............................................................................................................................. 2 1.3. Objectives of the study ...................................................................................................................... 3 1.3.1. General Objectives: ..................................................................................................................... 3 1.3.2. Specific objectives: ...................................................................................................................... 3 1.4. Research questions ............................................................................................................................ 3 1.5. Scope .................................................................................................................................................. 3 1.5.1. Time Scope .................................................................................................................................. 3 1.5.2. Geographical Scope..................................................................................................................... 3 1.6. Significance of the study .................................................................................................................... 4 1.6.1. To Somaliland Government: ....................................................................................................... 4 1.6.2. To Future Researchers or Scholars: ............................................................................................ 4 1.7. Description of the Study Area ............................................................................................................ 4 1.8. Organization of the paper .................................................................................................................. 4 Chapter Two: Literature Review ................................................................................................................... 5 2.1 Concepts, Opinion, and Ideas from Authors/Experts ......................................................................... 5 2.1.1. Inflation ........................................................................................................................................... 5 2.1.2 Types of inflation on the basis of speed and intensity: ................................................................... 5 2.1.2.1 Creeping Inflation: .................................................................................................................... 5 2.1.2.2 Galloping Inflation:.................................................................................................................... 5 2.1.2.3 Hyperinflation: .......................................................................................................................... 5 2.1.3 Causes of the inflation ..................................................................................................................... 6 2.1.3.1 Demand Bull Theory.................................................................................................................. 6 THE IMPACT OF INFLATION ON STANDARD OF LIVING

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2.1.3.2 Cost Push Theory ...................................................................................................................... 6 2.1.3.3 Excess Demand Theories........................................................................................................... 7 2.1.3.4 Market Power and Inflation ...................................................................................................... 7 2.1.4 Standard of living ............................................................................................................................. 8 2.1.4.1 Measurements of standard of living ......................................................................................... 9 1.

GDP per Capita .............................................................................................................................. 9

2.

Poverty and Living Standards ...................................................................................................... 10

2.2 Theoretical Framework ..................................................................................................................... 10 2.2.1 Inflation ...................................................................................................................................... 10 2.2.1.1 Monetary Theory of Inflation.................................................................................................. 10 2.2.1.2 Structural Inflation Theory ...................................................................................................... 11 2.3 Empirical Evidence ............................................................................................................................ 12 2.3.1. The impact Of Inflation to the Standard Of Living .................................................................... 12 Chapter Three: Research Methodology ...................................................................................................... 14 3.0

Introduction................................................................................................................................... 14

3.1

Research Design ............................................................................................................................ 14

3.2 Sampling Design ................................................................................................................................ 14 3.2.1. Study population. ...................................................................................................................... 14 3.2.2. Sample Size. .............................................................................................................................. 14 3.2.3. Research Procedures ................................................................................................................. 15 3.3. Research Instruments: ..................................................................................................................... 16 3.3.1. Questionnaire ............................................................................................................................ 16 3.3.2. Interview ................................................................................................................................... 16 3.4. Reliability & Validity of the Research Instruments .......................................................................... 16 3.5.

Data Collection ............................................................................................................................ 16

3.5.2 Data Analysis, Interpretation and Presentations ........................................................................ 17 3.6. Limitations of the study. .................................................................................................................. 17 3.6.1 Limited source of information ................................................................................................... 17 3.6.2 Scarcity of time .......................................................................................................................... 17 3.6.3 The researcher was limited by finance ...................................................................................... 17 CHAPTER FOUR: PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA ...................................... 18 CHAPTER FIVE: FINDINGS, CONCLUSIONS, RECOMMENDATIONS ............................................................. 31 THE IMPACT OF INFLATION ON STANDARD OF LIVING

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5.1 Conclusion: ........................................................................................................................................ 31 5.2 Recommendation:............................................................................................................................. 32 Reference .................................................................................................................................................... 33 Appendix 1: Questionnaire ......................................................................................................................... 35

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LIST OF FIGURES AND TABLES

Tables TABLE 3.1: Rule of thumb: Source……………………………………………………………15 TABLE 3.2: Research procedure………………………………………………………………..15 TABLE 4.1: Background of the respondents…………………………………………………….18

Figures FIGURE 1: Economic growth of Somaliland is an important factor that contributed the inflation in this country……………………………………………………………………………………19 FIGURE 2: The merchants of Somaliland are derived the prices of commodities up without considering the welfare of their society………………………………………………………….20 FIGURE 3: Lack of role of ministry of commerce has encouraged the merchants to raise the price of products………………………………………………………………………………………21 FIGURE 4: Lack of role of central bank and untaxed goods and services has encouraged merchants to take over price determination…………………………………………………………………22 FIGURE 5: The huge imports of goods from the abroad have an impact of inflation to the economy………………………………………………………………………………………….22 FIGURE 6: Unstable exchange rate and the dollarized economy have also extreme effect to the high price of commodity of Hargeisa especially Ga’an Libah District…………………………23 FIGURE 7: As far as the standard of living of households goes up also the prices of commodities go up……………………………………………………………………………………………24 FIGURE 8: The inflation hurts the life of groups in the society therefore the relationship between these variables is negative or inverse relationship………………………………………………25 FIGURE 9: The decline purchasing power is caused by the increasing prices and also lack of investment in Somaliland………………………………………………………………………25 FIGURE 10: Incomes of households are increasing positively for the last twenty years in Somaliland………………………………………………………………………………………26 FIGURE 11: There is no need of government policies to control inflation……………………27 FIGURE 12: There is a different business owners who sell their products and services higher prices other than ordinary prices that led others to do the same…………………………………………27 FIGURE 13: Unexpected changes in the prices causes chaos in the local markets……………….28 THE IMPACT OF INFLATION ON STANDARD OF LIVING

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LIST OF ABBREVIATIONS AND ACRONYMS PPP: Purchasing Power Parity NGOs: Non-Government Organizations GDP: Gross Domestic Production IMF: International Monetary Fund HDI: Human Development Index UNDP: United Nations Development Programme

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ABSTRACT Inflation is simply rise in prices of commodities and devalues of money. It directly influences the standard of living. The effect of inflation has made it very difficult for many households have to get their basic necessities which have gone beyond their purchasing power. This study is about the impact of inflation to the standard of living and its main objectives are to find out the riskiness of inflation to the purchasing powered of society and to determine the main factors those contribute the inflation of Somaliland. The purpose of this paper is to give the impact of inflation on standard of living. This paper examines the dynamic interactions between inflation and standard of living in Somaliland, to see how the inflation affects standard of living, Somaliland people has been weakened by uncontrollable inflation and they need a long term solution which at least reduce the inflation or the rising prices of the commodities. The researcher used a sample size of 96 respondents which will be a mixed people of all stages of population like; low, middle, and high income households and it may also include some economists and other related institutions. And this made easy to gather a reliable information and accurate data. The researcher summarized the findings of the study and confirmed that inflation hurts the standard of living and real purchasing power of society, the study also discovered that inflation in hargaisa especially this district (Ga’an Libah) is worsening after time.

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Chapter One: INTRODUCTION 1.1 Background of the study Inflation is an inevitable property of any economy in the world. It influences every country, negatively as well as positively, whether it is developed or developing country as well. Zou, ET. al. (2011) stated that inflation is an important factor leading to social and economic instability and disorder. It is one of the most largely observed and tested economic variables both theoretically and empirically. Its causes, impacts on other economic variables, and cost to the overall economy are well known and understood (Rizvi and Naqvi, 2010). As the percentage of inflation increases, the cost of all commodities also increases. It can also be viewed as a fall in the real value of money being a reduction of purchasing power of consumers and thus making standard of living very high. Evidently it is estimated that the price rise of 2008 led to an average increase of poverty rates of 4.5 percentage points (using the poverty line of 1 US-Dollar, corrected for purchase power parity, PPP). If this result is extrapolated to the global low-income population of 2.3 billion people, another 100 million people to those who live in absolute poverty may have added. Compared with the 75 million additional undernourished people estimated by FAO, and considering that correlation between the percentage of undernourished people and the headcount ratio of poor is about 0.75, this figure may be on the pessimistic side, but the order of magnitude is plausible (Ivanic and Martin, 2008). According to The Daily News (2010) Report it is true that unscrupulous shopkeepers have taken advantage of the situation by raising prices as they haven’t any other choice to meet their own inflated cost of living.

Carlos (2009) concludes that inflation is a global matter of concern because large segments of population have been affected while the marginalized sectors are comparatively more affected where a larger proportion of income is destined towards purchasing edibles. The implication is obvious and the effects are palpable as sharp rise in the price of rice, and food more generally, across Asian countries can be expected to wreak havoc among lower-income groups. In particular, a substantial increase in miseries may be expected of those who are already living below the poverty line, and can be expected to drive others into poverty (ADB Report, 2008). Millions of people are being pushed further into hunger as food becomes unaffordable (The Daily News. January 30, 2011). If inflation raises the central bank raises the interest rate, meaning that the cost of borrowing increases so the amount of money borrowed by individuals and companies decreases, which in turn decreases the amount of money in the economy (money supply). The effect of inflation on interest rate is simply THE IMPACT OF INFLATION ON STANDARD OF LIVING

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caused by the bank's attempt to reduce it. On the other hand, increase in inflation necessitates the central bank to increase interest rate where businesses borrow at higher cost; this cost es on to consumers, which increases consumer price index (Rasmussen and Tetteh, 2007). The effect of inflation has made it very difficult for many African households have to get their basic necessities which have gone beyond their purchasing power. African households therefore resort to loans to satisfy their needs, which further over burden their family economy, because they have to pay their loans with interest. The high level of inflation causes instability in an economy because money does not hold its value for a long time. Workers therefore have a higher need for better remuneration to cover up the higher costs of living because prices of goods and services are increasing every day. Many of such problems have bedeviled, and still are being faced by the Somaliland and east African economy. Somaliland has no an effective economic system that works properly, therefore it is difficult to explain any component of the economic philosophy such as the rate of inflation and unemployment, which are the most important tools that drive the measurement of economic wellbeing of any country whether its developed or under developed one. This research therefore focuses on finding the impact of inflation on the standard of living of people in Ga’an Libah district of Hargeisa and other additional districts in the city of Somaliland.

1.2 Problem statement Inflation is simply rise in prices of commodities and devalues of money. It directly influences the standard of living. This research dealt with the effects of inflation on standard of living in of expenses on food and non-food items, income, saving, loan and recreation in the city of Somaliland specially Ga’an Libah district. The inflation rate of Somaliland still remains high in absolute and by comparison with many other countries in the sub-region and the world in general. There is some hard problems like high prices on goods and services because there is no government plans to address and determine the original prices of this products and services, the households in this district are so poor and some of them haven’t the basic needs. In this district there is allot of households which earns very low income and other basic needs like; Shelters, clean water and also food and clothes, so this research will examine how the increasing rate of inflation in this country affects these households and their life. Rising inflation is one the unsolved problems in Somaliland and the political plans of the government aren’t success plans, therefore these people suffer enough for their life because of their adorability on high prices and the unemployment in all Somaliland, THE IMPACT OF INFLATION ON STANDARD OF LIVING

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inflation, especially when inflation is unexpected and catches people off guard or when it fluctuates widely from month to month or year to year. And also this research will look into what are the main the sources of the inflation and what causes it repeatedly, why inflation in this country is uncontrollable.

1.3. Objectives of the study 1.3.1. General Objectives: The main objective of this research is to examine how inflation effects the standard of living and income households, and also to investigate how the people of Somaliland understand inflation. 1.3.2. Specific objectives: 1. To assess the effect of inflation in standard of living of the of the target population. 2. To examine the main sources cause the increasing and uncontrollable inflation. 3. To find out the possible solutions of controlling and deducting the inflation. 4.

To recommend policy possibility of interventions to tackle the problem of inflation on living standard.

1.4. Research questions 1. How inflation effect the standard of living of the people in this district? 2. What are the main sources cause the increasing and uncontrollable inflation? 3. Is there is any possible solutions of controlling and deducting the inflation? 4. State the recommendations of policy possibility of interventions to tackle the problem of inflation on standard of living?

1.5. Scope 1.5.1. Time Scope This study will be conducted in late 2016. 1.5.2. Geographical Scope This study will conducted in the selected area of Hargeisa, Somaliland (Ga’an Libah District) and some other extra districts to evaluate and do some observations to look into the situations and if there is any differences and similarities between Ga’an Libah districts and the other districts.

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1.6. Significance of the study The research will focus on the impact of inflation on standard of living. The research will be important to different groups’ economists, NGOs, policy makers, researcher and the government specially the central bank of Somaliland ministry of planning as well. 1.6.1. To Somaliland Government: The research will help the government to make development and improvement the standard of living the people of Somaliland also it will help the NGOs to make a surveys to help the government creating a policy and plans to control and deduct the inflation in this district and other districts of the capital city of Somaliland. 1.6.2. To Future Researchers or Scholars: The research will be very important to me as a researcher because we hope to acquire research skills and apply my knowledge toward research methodology, also developing skills like data collection and data analysis. The research will also be beneficial to future researcher who will carry out a research to the same topic about the impact of inflation on standard of living.

1.7. Description of the Study Area This research area is Ga’an Libah district of Hargeisa and some other districts, this district is located North/East of Hargeisa, a very large district surrounded by mountains and hills. It shares borders with 26 June in the west and Mohamoud Haybe in the South, there 7 primary and intermediate schools in this district but and only 1 secondary school and also it has a large markets and business environment. This district is one of the largest district in the capital and there is a lot of population.

1.8. Organization of the paper This research is consist of five chapters plus questionnaire and every chapter has its own details and purpose. The first chapter is about the introduction of this paper, the second chapter is about the literature review which explains the related studies and what the previous researchers said about this study, the third chapter is the methodology which the methods we are going to use In this study, the fourth chapter is about the data analysis and its interpretation, the fifth and the last chapter is about the findings, recommendations and the conclusions of this plus the questionnaire which we gather the data of this study.

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Chapter Two: Literature Review 2.1 Concepts, Opinion, and Ideas from Authors/Experts 2.1.1. Inflation Inflation is a main problem of most economies in the world and influences a country’s growth in diverse ways. According to Zou et al. (2011), inflation is a major factor that leads to social and economic instability. It is also viewed to be the most observed and tested economic variables both theoretically and empirically (Farid ET at, 2012). Inflation is often assumed to affect all people in the same way. In practice, differences in spending patterns across households and differences in price increases across goods and services lead to unequal levels of inflation for different households. Inflation is a persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services (Houghton, 2000) and to Wilson (1982) it is too much money chasing too few goods. Inflation is a state in which the value of money falls and price level persistently rises. It also takes place when price level expands more in proportion to output (Shahid, 2010). In addition, it refers to a rise in the general level of prices of goods and services over time and prices of some specific set of goods or services, as in “commodities inflation” or “core inflation”, which is measured as the percentage rate of change of a price index (Haq, 2008).

2.1.2 Types of inflation on the basis of speed and intensity: 2.1.2.1 Creeping Inflation: This is also known as mild inflation or moderate inflation. This type of inflation occurs when the price level persistently rises over a period of time at a mild rate. When the rate of inflation is less than 10 per cent annually, or it is a single digit inflation rate, it is considered to be a moderate inflation. 2.1.2.2 Galloping Inflation: If mild inflation is not checked and if it is uncontrollable, it may assume the character of galloping inflation. Inflation in the double or triple digit range of 20, 100 or 200 percent a year is called galloping inflation. Many Latin American countries such as Argentina, Brazil had inflation rates of 50 to 700 percent per year in the 1970s and 1980s. 2.1.2.3 Hyperinflation: It is a stage of very high rate of inflation. While economies seem to survive under galloping inflation, a third and deadly strain takes hold when the cancer of hyperinflation strikes. Nothing good can be said THE IMPACT OF INFLATION ON STANDARD OF LIVING

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about a market economy in which prices are rising a million or even a trillion percent per year. Hyperinflation occurs when the prices go out of control and the monetary authorities are unable to impose any check on it. had witnessed hyperinflation in 1920’s.

2.1.3 Causes of the inflation 2.1.3.1 Demand Bull Theory John Maynard Keynes (1883-1946) and his followers emphasized the increase in aggregate demand as the source of demand-pull inflation. The aggregate demand comprises consumption, investment and government expenditure. When the value of aggregate demand exceeds the value of aggregate supply at the full employment level, the inflationary gap arises. The larger the gap between aggregate demand and aggregate supply, the more rapid is the inflation. Keynesian (Keynes and his followers) do not deny this fact that even before reaching full employment production factors and various appearing constraint can cause increase in public price. This inflation constraint that appears quickly during prosperity is originally resulting from no proportioned section, branches and or various economic resources that are ed from natural properties of discipline based on market. Therefore, in one period of prosperity it is completely natural. According to demandpull inflation theory of Keynes, policy that causes decrease in each component of total demand is effective in reduction of pressure demand and inflation. One of the reductions in government expenditure is tax increase and to control volume of money alone or together, can be effective in reducing effective demand and inflation control. In difficult conditions, e.g. hyperinflation during war that control of volume of money or decrease in general expenditure may not be practical increase in tax can get along with direct action for control on demand. 2.1.3.2 Cost Push Theory Cost-push inflation is caused by wage increases enforced by unions and profit increases by employers. The type of inflation has not been a new phenomenon and was found even during the medieval period. But it was reviewed in the 1950s and again in the 1970s as the principal cause of inflation. It also came to be known as “New Inflation”. The basic cause of Cost-Push inflation is the rise in money wages more rapidly than the productivity of labor. The labor unions press employers to grant wage increases considerably, thereby raising the cost of production of commodities. Employers in turn, raise prices of their products. Higher wages enable workers to buy as much as before, in spite of higher prices. On the other hand, the increase in prices THE IMPACT OF INFLATION ON STANDARD OF LIVING

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induces unions to demand still higher wages. In this way, the wage-cost spiral countries, thereby, leading to cost-push or wage-push inflation. Cost-push inflation may be further aggravated by upward adjustment of wages to compensate for rise in cost of living. A few sectors of the economy may be affected by increase in money wages and prices of their products may be rising. In many cases, their products are used as inputs for the production of commodities in other sectors. As a result, cost of production of other sectors will rise and thereby push up the prices of their products. Thus wage-push inflation in a few sectors of the economy may soon lead to inflationary rise in prices in the entire economy. Further, an increase in the price of imported raw materials may lead to cost-push inflation. Another cause of Cost-Push inflation is profit-push inflation. Oligopolist and monopolist firms raise the price of their products to offset the rise in labor and cost of production to earn higher profits. There being imperfect competition in the case of such firms, they are able to istered price of their products. Profit-push inflation is therefore called istered-price inflation or price-push inflation. 2.1.3.3 Excess Demand Theories Excess demand is when the supply of goods and services falls short of the demand for them. Excess demand leads to rise in prices of goods and services because interested consumers engage in competitive bidding which result into higher prices. This view is better explained using the Keynesian analysis. The excess-demand theories argued that excess demand for goods and services over supply in an economy is the main source of inflation. This view that was implicitly reflected in the Phillips empirical study in the late 1950s, which showed a trade-off between unemployment and inflation (the Phillips curve), led the monetarists to search for a theory that can explain the existence of excess– demand to propagate inflationary conditions. 2.1.3.4 Market Power and Inflation Market power exercised by firms has become central to macroeconomics. Hall (1986, 1988) demonstrates how substantial market power and declining or flat marginal costs attenuate firms' incentive to alter prices, thus contributing to aggregate fluctuations. In general equilibrium frameworks, market power heightens the sensitivity of output and employment to demand policies (Hart, 1982; Blanchard and Kiyotaki, 1987) and enhances the ability of calibrated models to mimic the data (Rotenberg and Woodford, 1996). Additional work (surveyed in Rotenberg and Woodford, 1991, 1999)

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emphasizes that cyclical variation in market power can attenuate or amplify the equilibrium impact of macro shocks. Market power may be sensitive to inflation, thus creating an additional channel by which inflation directly affects the macroeconomic. In a series of papers, Bénabou (1988, 1992a, 1992b) links the welfare costs of inflation to its impact on market power. When monopolistically competitive firms set prices with (S, s) rules, he shows that inflation increases the dispersion of prices within an industry. Consequently, buyers devote more resources to search and, for a given level of market power, inflation lowers welfare. However, additional search may reduce market power and lessen resource misallocation. On balance, the welfare effects of inflation are ambiguous, and depend critically on the sign of the relation between market power and inflation. In Ball and Roomer (1996) and Tomas (1994), inflation lowers welfare by increasing relative price variability, reducing the information about future prices contained in current prices, and thus allowing firms to raise markups on less informed and less price-elastic consumers.

2.1.4 Standard of living Standard of living is defined as the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area. And quality of life is defined as the perception of ability to meet daily needs, physical activities, and well-being. In generally, Standard of living is related on the buying power of the household and the owning power of property in the country. So it is always related the income of people and the economic inflation rate. Quality of life is the general wellbeing of a society in term of health care, education, political freedom, a clean natural environment and any that can help to improve one's satisfaction and happiness. Good in standard of living is always being first; and then we will able to have a high quality of life. A good standard of living had the characteristic of high income, low inflation and low unemployment happen in the country. From the perspective of business, standards of living in the country are important information that shown the level of consumption in the country. This is will bring lots of profit to the business because when the households are paid well, so they will spend more. Beside that's quality of life are also important to business activity, because when the quality of life is high in the country, they will desire for high quality and more luxury goods and services. Maybe standard of living and quality of life will affect the decision making of a business but

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business activities is the main factor that affecting and influencing the standard living and quality of life in the country (G Camba-Mendez,2006). 2.1.4.1 Measurements of standard of living Measuring living standards is very important for economic policy. However, in practice there are several difficulties in measuring living standards and therefore there are several different measures we could use. 1. GDP per Capita GDP measures National Output / National Income. Per capita is the average income per person in the economy. This is a rough guide to living standards because it measures average incomes / the amount produced in an economy. However, income and average output is only a rough guide to living standards. (For example, increased GDP per Capita could be at the cost of increased pollution; in this case, higher GDP could lead to a decline in living standards. 

GDP – Purchasing Power Parity PPP

Another important factor in measuring living standards is GDP measured at Purchasing power parity. This means that the statistics take into the actual cost of living. For example, some countries may have lower GDP, but the cost of living is much cheaper. PPP adjusts for these different costs of living. 

Real GDP per Capita / Hours Worked

A more accurate guide to living standards is to take into the number of hours worked. If you gain high GDP per capita but have to work a 12 hour day, then this is less desirable than same income for 6 hours work per today. (Measuring living standards / hours worked) 

Household Expenditure / Consumption

Most measures of living standards focus on income. However, income is only a rough guide to the goods and services you can actually buy. Some people may have very high living costs (e.g. rent / council tax / transport costs). Therefore, the quantity of goods and services you can actually buy will give a better guide to living standards than just income. Another issue is that some people may receive benefits in kind. E.g. those on means tested benefits often receive prescriptions and dentist visits for free. Therefore, their living standards are better than their actual income may suggest. When comparing UK vs. US, one feature of the US is that people have to devote a high % of income to health care insurance. THE IMPACT OF INFLATION ON STANDARD OF LIVING

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2. Poverty and Living Standards An important factor in measuring living standards for the economy is the number of people living below the poverty line. The poverty line is defined as: The level of expenditure necessary to buy a minimum level of nutrition and other basic necessities. The World Bank say that the poverty line can vary somewhat from country to country, reflecting different costs of living for taking part in the everyday life of society. I.

Index of Human Development HDI

This is a measure which seeks to look at the available choices that people have. It is a composite indicator comprised of 3 basic factors affecting living standards – income, life expectancy and education. The three components are: 

Real GDP per Capita, adjusted for the local cost of living (PPP)



Life expectancy



Education – levels of literacy

The highest human development is given a value of 1. Low levels of Human development are given a value close to 0. 

In 1997, the country with the highest levels of HDI was Canada with 0.932



The poorest country was Sierra Leone with an HDI of 0.254

II.

Index of Human Poverty HPI

This was introduced by the United Nations Development Programme UNDP It is similar to the Index of Human Development, but, the HPI gives a greater weighting to examining how economic development is distributed throughout society

2.2 Theoretical Framework 2.2.1 Inflation 2.2.1.1 Monetary Theory of Inflation Monetarism refers to the followers of M. Friedman (1912-2006) who hold that “only money matters”, and as such monetary policy is a more potent instrument than fiscal policy in economic stabilization. According to the monetarists, the money supply is the “dominate, though not exclusive” determinant THE IMPACT OF INFLATION ON STANDARD OF LIVING

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of both the level of output and prices in the short run, and of the level of prices in the long run. The long- run level of output is not influenced by the money supply. The monetarists emphasized the role of money. Modern quantity theory led by Milton Friedman holds that “inflation is always and everywhere a monetary phenomenon that arises from a more rapid expansion in the quantity of money than in total output. Its earliest explanation was to be found in the simple quantity theory of money. The monetarists employed the familiar identity of exchange equation of Fisher. Asserts that money supply growth is the cause of inflation. Faster money supply growth causes faster inflation. In particular, 1% faster money supply growth causes 1% more inflation. With other things constant, the price level is proportional to the money supply. Doubling the money supply would double prices. 2.2.1.2 Structural Inflation Theory About 40 years ago, the concept of structural inflation entered in economic discussion and research. It is related to the effect of structural factors on inflation. Structural analysis attempts to recognize how economic phenomena and finding the root of the permanent disease and destruction such as inflation that evaluates lawful relationship between the phenomena. In the economic structural factor causes, supply increase related to demand-push, even if abundant unemployment production factor is impossible or slow. Therefore, reasoning of less developed countries, till the time not successful to change in the form of lagging behind structure or not to make attempt for immediate self-economic growth or should compromise with the inflation that is very severe sometimes. This inflation, giving the structural improvement, results as a cost in fact that is given for immediate economic growth. Structuralism, even the group that does not fine necessary for changing the present policy foundation for eradicating inflation, with the control of inflation through government intervention in the market structure and also, by adopting decisive plans for justly division of inflation pressure there is no opposition and in fact stress is done on these arrangement. But, common anti-inflation measures especially contraction monetary and budget policy from their point of view, is nothing but only a prescription for stopping the economic growth of non-developing countries, that also through experts that or rationing developed investment countries and world organization under their supremacy (rule) and or by understanding less developed economy features are disabled (crippled).

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Rapid and faster growth of the service sector that is related to population growth and immigration is another inflationary factor, which is more emphasized by the structuralism. Remaining structure of distribution network, exclusive quasi and structure some of the developed industry, obstacle structure and heavy cost of works and tens of other small and big factors additionally to all these structuralism from the aspect of inflationary social policy structure is unaware. It should be noticed that level competition and various society crust for large possession share from National income is one of the main factors of the hidden inflation in the developed investment countries. Structuralism type from this competition in hyperinflation of less developed countries is effective.

2.3 Empirical Evidence 2.3.1. The impact Of Inflation to the Standard Of Living Inflation always hurts your standard of living. Rising prices means you have to pay more for the same goods and services. If your income increases at a slower rate as inflation, your standard of living declines even if you are making more. Inflation's main consequence is a subtle reduction in your standard of living. Inflation doesn't affect everything equally. Gas prices can double while your home loses value. This makes financial planning more difficult. Inflation is really bad for your retirement planning because your target has to keep getting higher and higher to pay for the same quality of life. In other words, your savings will buy less. As a result, you will need to save more today to pay for higher priced goods and services in the future. Since everything you buy today costs more, so you have less left-over income available to save. Inflation has another bad side-effect...once people start to expect inflation, they will spend now rather than later. That's because they know things will only cost more lately. This consumer spending heats up the economy even more, leading to further inflation. This situation is known as spiraling inflation because it spirals out of Control. Inflation is important if you are holding bonds or Treasury notes. These fixed price assets only give a fixed return each year. As inflation spirals faster than the return on these assets, they become less valuable. As they become less valuable, people rush to sell them, further depreciating their value. As their value becomes lower, the U.S. government is forced to offer higher interest rates to sell them at all. This increases mortgage interest rates. Although, inflation deteriorates living standard but not for all, yet, it blesses too, e.g. debtors, and is a contributing factor of motivation to earn more and more to cope with the phenomenon. Your standard THE IMPACT OF INFLATION ON STANDARD OF LIVING

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of living is largely based on two factors: your income and your expenses. Inflation occurs when dayto-day expenses rise. An imbalance in the relationship between supply and demand causes inflation. Prices rise as increasing numbers of people compete to buy a limited number of goods. Periods of inflation are common in functioning free market economies. However, inflation can have a profound effect on your standard of living.

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Chapter Three: Research Methodology 3.0

Introduction

This chapter discusses the different aspects of methodology applied in this study. These include: research design, area of study, study population, sampling method, data collection methods and instruments, data quality control, data analysis and presentation, ethical issues and limitations of the study.

3.1

Research Design

Descriptive correlational design: The level of influence and effect of one variable on the other, the researcher evaluates the relationship between two variables. We apply descriptive correlational design to investigate the relationship between Inflation and Standard of living In The case of Ga’an Libah district of Hargaisa, Somaliland. Both quantitative and qualitative methods were used to make sure that all the important and relevant information for the study was utilized. According to Lisle (2011), mixed research method strengthen the validity of the research findings. It also improves instrumentation for the data collection approaches. Research design also deals with the source of data, sampling technique, data collection and analysis methods in the study reaching to the point of knowing the impact of inflation on the standard of living in Ga’an Libah district of Hargeisa (Kothari, 2004)

3.2 Sampling Design 3.2.1. 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. 3.2.2. Sample Size. Sample is the process of choosing 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).

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Table 3.1: Rule of thumb

Source: James Cridland, Sample size (The rough guide) 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. 3.2.3. Research Procedures In this study the sample of 48 respondents will be used, these sample will be selected using only simple random sampling and this will save a time and other resources and also it will be far from bias, we have to be very careful when we selecting the respondents if there is to be a confidence that the information will be appropriate and normal.

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Table 3.2: Research procedure Category of the Respondents Ga’an Libah

Population

Sample Size

>55000

70

Simple Random Sampling

40

15

Simple Random Sampling

Other Districts

10

11

Simple Random Sampling

Total

>55000

96

Sampling Method

District Istanbul Refugee Camp

3.3. Research Instruments: The instruments of this research used by the researcher are both questionnaire and interview. 3.3.1. Questionnaire The largest data of this study is collected by using questionnaire which consists of 50 questions prepared by the researcher and answered by the respondents. The questionnaire is open ended questions which are much related to the topic and it was constructed in such a way to capture relevant data about the key variables involved the impact of inflation to the standard of living of the community. 3.3.2. Interview 46 of the respondents is interviewed by the researcher which was face to face interview and the reason is that some of the households are very confidential therefore the researcher prepared some wellprepared questions and went to visit some of the households of Hargeisa city specially those live with poor situations and also most of these people are illiterate in order to grasp the real standard that they are in live.

3.4. Reliability & Validity of the Research Instruments I.

Reliability is all about test and retest method. If the researcher distributes his questionnaire to the same number of people twice and finds out that there is a big difference in their responses, then there is something wrong with his method of data collection.

II.

The validity of the instrument will be assessed through expert judgment and the researcher will make sure the coefficient validity to be at least 75% the researcher will consult his supervisor for expert knowledge for the construction of the questionnaire.

3.5.

Data Collection 3.5.1 Sources of Data THE IMPACT OF INFLATION ON STANDARD OF LIVING

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Data will be collect from both primary and secondary sources. Primary sources these were basically the respondents and it’s from the result of the questionnaires and interviews that will be distributed among the sample size of the targeted population. Secondary data will be less most of the data will be primary data generated from government institutions previous Data and some NGOs secondary data. 3.5.2 Data Analysis, Interpretation and Presentations At this research paper the data that the researcher will gather is analyzed by using suitable computer applications such as SPSS, and EXCEL programs, therefore it’s analyzed profoundly. These program can be used to analyze data collected from surveys, tests, observations, and etc.it can perform a variety of data analyzes and presentation functions including statistical analyses and graphical presentation of data. This will be done by using the descriptive data analysis and some of the information gathered in the questionnaire was also organized and interpreted.

3.6. Limitations of the study. Limitations of the study are some constrains you experience in the process of the research, there was a lot of limitations like cost, time, and resource limitations. 3.6.1 Limited source of information The research in this area was few therefore was limitation of information on the study/research topic, however the researcher used internet to get information. 3.6.2 Scarcity of time The limitation of time factor to complete the research, however the researcher tried to budget time properly to see that the report was finished in time. 3.6.3 The researcher was limited by finance To facilitate conduct of research in of printing and looking for information, however the researchers tried their best to finish a successful compilation of the research report or work.

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CHAPTER FOUR: PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA TABLE 4.1: Background of the respondents Frequency

Percent

Age 18-25 26-30 31-40 Above 40

16 28 23 29

16.7 29.2 24.0 30.2

Gender Male Female

51 45

53.1 46.9

Marital status Single Married Widowed

30 50 16

31.3 51.2 16.7

22 24 21 29

22.9 25.0 21.9 30.2

5 31 21 8 31

5.2 32.3 21.9 8.3 32.3

Educational level University Secondary Primary None Occupation Gov’t staff Business man Self-employee Student Unemployed Source: Primary Data

As the above table shows in attempt to find the gender of the respondent 53 percent of respondent were male and other 47 percent ere female. The reason of this is because of the households, the people we were investigating were mostly parents and adult people and also local business people. The table above show that 17 percent of the respondent’s age were 18-25, and 29 percent of respondent’s age between 26-30 , 24 percent of respondents were between31-40 , and 30 percent of respondent’s between 18-25 while 15 percent above 40. The respondent’s ages are different because of the different households in the district and their families.

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The table indicates that 52 percent of respondent were married, and the reason is that most of the households there was a lot of parents and married couples, 31 percent of the respondent were single while 17 percent of the respondent were widowed, there is a lot of widowed respondents in this district because of there is low income families in this district. The table above shows that 23 percent of respondent were university level because of they were a people who study after Somaliland got its independence back, 25 percent respondent were secondary level and the reason was unaffordability of education and other personal problems, 22 percent of respondent were primary /intermediate level while 30 percent was uneducated and the reason is most of those people didn’t get the chance to study education.

As the above table shows 5% of respondents are government staff and 23% were businessman, while other 22% were self-employee and 8% were students and the rest 32% were unemployed most parents. Figure 1: The increase of the number of population has caused the inflation in this district:

Source: Primary Data THE IMPACT OF INFLATION ON STANDARD OF LIVING

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The first question of the questionnaire is analyzed at the above chart which shows that 80 percent of the respondents believe that increase of population has caused the inflation that exists here in t hi s di st ri ct a nd t he ot her p art s o f Somaliland while 20 percent of the respondents are not in believe or disagreed that idea. Figure 2: Economic growth of Somaliland is an important factor that contributed the inflation in this country:

Source: Primary Data The above chart shows that the economic growth of Somaliland is an important factor that contributed the inflation of Somaliland because 66 percent of the respondents agreed to this idea, Therefore as the majority of the respondents believe and the researcher confirmed that economic growth is one of the most important factors that pushing prices up. While remaining 34 percent refused and believe that economic growth is not so important factor that caused the inflation.

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Figure 3: The merchants of Somaliland are derived the prices of commodities up without considering the welfare of their society:

Source: Primary Data As the above chart shows 77 percent of the participants of this study confirmed that they agreed that merchants are deriving prices of commodities up without giving much consideration the welfare of the citizens in this district and also all over and that’s because of the government of Somaliland and their poor management of commercials, while other 19 percent of the respondents disagreed.

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Figure 4: Lack of role of ministry of commerce has encouraged the merchants to raise the prices.

Source: Primary Data As the above figure indicates the weakness of the government and lack of role of ministry of commerce to the market has encouraged the merchants to seek unfavorable profit which increased the prices and led the sever inflation here is Somaliland, this statement is the fact in the country and there is no political plans for this problems, and because of the 81 percent of confirmation of the respondents while only 19 percent refused to agree.

Figure 5: Lack of role of central bank and untaxed goods and services has encouraged merchants to take over price determination.

Source: Primary Data THE IMPACT OF INFLATION ON STANDARD OF LIVING

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As the above figure shows because of non-functioning central bank of Somaliland caused that the merchants in this country determine the prices of the commodities with considering the society, as the table and chart above shows 66 percent of the respondents agreed this argument while only 34 of the respondents disagreed.

Figure 6: The huge imports of goods from the abroad have an impact of inflation to the economy.

Source: Primary Data The above chart shows that 73 percent of the respondents agreed that the huge imports of goods from the abroad have an impact to the inflation in Somaliland, this is because of the importers will pay a lot of money as taxes and they will sell their commodities higher prices. While 27 percent of them disagreed. Therefore the researcher confirmed that the huge import has an impact to the inflation.

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Figure 7: Unstable exchange rate and the dollarized economy have also extreme effect to the high price of commodity of Hargeisa specially Ga’an Libah District:

Source: Primary Data As the above figure shows that Somaliland exchange rate is unstable and the economy is more dollarized, after a research made by the researcher 68 percent of the respondents agreed that both of the above factors have a remarkable effect to the inflation that plagued in Somaliland, while only 19 percent of the respondents disagreed. Therefore as the majority of the researcher confirmed that both of the exchange rate and the dominate role of the dollar to the Somaliland economy have both have an important role to the increase of prices and this is because of the lack of central bank’s role and lack of government intervention in exchange rate determination and the local merchants can determine their own prices of commodities and exchange rate, and also the uncontrollable dollarized economy that the society use dollars as medium of exchange which is makes this situation worsen.

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Figure 8: As far as the standard of living of households goes up the prices of commodities go up:

Source: Primary Data The above chart confirms that 51 percent of participants agreed that improving standard of living of households is accompanied by increasing level of prices and makes Somaliland money less valuable, while almost 49 percent of the respondents disagreed and argued that whether their incomes and their life style goes up or goes down the prices are always go up. Figure 9:

Source: Primary Data THE IMPACT OF INFLATION ON STANDARD OF LIVING

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The above chart classifies the answers of the respondents which 49 percent of them agreed that the relationship between inflation and standard of living is inverse or negative relationship, while 51 percent of them refused that statement. Figure 10:

Source: Primary Data As the above figure indicates the decrease of purchasing power is caused the decreasing prices and lack of investment is declared by the researcher because 81 percent of the participants of the study agreed that increasing prices and lack of investment in Somaliland have caused the declining purchasing power, and argued that when the prices goes up and the family is gets same incomes their purchasing power declines, while 19 percent of the participants disagreed.

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Figure 11:

Source: Primary Data As the above figure shows 72 percent of the respondents agreed that incomes of households for the last twenty years are increasing positively here in Somaliland, which is caused by the creeping economic and social development in the last 20 years, therefore the study approves that incomes of households are increasing positively for the last twenty years, while 28 percent of the respondents disagreed this argument and answered that they lived a low life the 20 years. Figure 12:

Source: Primary Data THE IMPACT OF INFLATION ON STANDARD OF LIVING

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The above chart shows that the 21 percent of the respondents agreed that there is no need of government policies to control inflation in this country while 79 percent of the respondent disagreed this argument and suggested that government should interfere. Figure 13: The inflation hurts the life of groups in the society therefore the relationship between these variables is negative or inverse relationship:

Source: Primary Data As the above chart shows there is a lot of merchants or business people who sell their products higher prices than the local market and this will lead that all other merchants do the same in order to gain profits for their own selves, so 78 percent of respondents agreed this argument while only 22 participants disagreed this statement.

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Figure 14:

Source: Primary Data As the above chart shows 71 percent of participants of this study agreed that unexpected changes in the prices of commodities cause chaos in the local markets and the society suffer in that changes, while 39 percent of the participants disagreed.

Open Ended Question: in the opinion of the respondent, these are the corrective measures that they believed it can minimize the riskiness of inflation. There is many different answers proposed by the participants but here the researcher presents the most common answers and the corrective measures they answered which are as follows: Central bank should be improved and the government should control all the exchange rate through central bank, this will make easy to control determination of the exchange rate. Neutral tax should be levied on the imported goods until there is a solution to restrict and ban all the products that Somaliland industries can produce in order to restrict it.

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Domestic products should be encouraged. And also infant industries need a protection which would help them to become a sustainable producer for the local markets of Somaliland. The government must made tax exemption on food. The

government

must

encourage

investment

in

order

to

improve

employment

opportunities and also to encourage micro finance institutions to lend infant industries more money so they can improve their industries. Export of Somaliland goods should be enhanced. Stabilization of economic variables. These are the common solutions that respondents answered; therefore this study is proposing these arguments to the concerned groups such as government institutions those are mentioned at the above points. Government has very limited role to the market, and they suggested that government role should be improved.

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CHAPTER FIVE: FINDINGS, CONCLUSIONS, RECOMMENDATIONS 5.1 Conclusion: This study is about the impact of inflation to the standard of living and its main objectives are to find out the riskiness of inflation to the purchasing powered of society and to determine the main factors those contribute the inflation of Somaliland. It also focuses the exact impact that inflation does exert the life of individuals and the real relationship between these variables.it also focuses on the reasons that the government wouldn’t interfere the impact of inflation on standard of living and why the inflation of Somaliland especially the capital city of hargaisa is uncontrollable and why the prices are always rising not declining, and what is government’s policy recommendation towards inflation. The researcher used two instruments of data collection which are questionnaire and interview. 50 selected households have answered 20 well prepared questions those are intended to grasp the real information, there is also face to face interview made by the researcher to 46 selected households which was mostly illiterate households and we helped them to answer question appropriate way and we fill the questionnaire. Therefore after the analyze of the collected data the researcher found that 91 percent of the respondents agreed that inflation worsens the purchasing power of society, which clearly decides that inflation has an negative impact to the purchasing power of Somaliland society and their standard of living which effects their basic necessities like sheltering and water and sanitation. This study also summarizes the most important factors those contribute the inflation of Somaliland are the huge imports of goods from abroad and rises the prices of the commodities which effects the society and lack of role of ministry of commerce or lack of government intervention to the market which is why the local merchants decide the determination of prices of the most commodities, therefore 85 percent of the respondents agreed this argument, 92 percent of the respondents also confirmed that unstable exchange rate and dollarized economy have also remarkable effect to the inflation of Somaliland, this caused by the uncontrollable dollar economy which most of the society use as medium of exchange and save their money as dollar, there is other currencies in the local markets of hargaisa but these currencies are functioning as dollar. In conclusion the researcher confirmed that inflation hurts the wellbeing of the standard of living where 93 percent of the participants agreed that inflation has a negative impact to the standard of living, and effects the life style of the low income households specially the refugee camps in the THE IMPACT OF INFLATION ON STANDARD OF LIVING

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city like ISTANBUL and MOHAMED MOOGE refugee camps, and this inflation is the one most harmful problems that most of developing countries are facing specially Somaliland. Therefore the relationship between inflation and standard of living is inverse.

5.2 Recommendation: 

In the conclusion of this study the researcher summarized the findings of the study and confirmed that inflation hurts the standard of living and real purchasing power of society, the study also discovered that inflation in hargaisa specially this district (Ga’an Libah) is worsening after time and the government of Somaliland must set a policy for controlling inflation or at least to slow it’s rate. The researcher recommended the following points:



The ministry of finance should impose heavy restrictions to the imported goods since they are causing inflation or taking a huge contribution this worsening situation.



The government should encourage and improve the central bank in order to manage the exchange rate and take back the determination of exchange rate as well as supply of money to distribute efficiently.



Since inflation is big disaster in here Somaliland the government must set policies towards that problem and the ministry of commerce should participate and also the ministry of planning should take part of planning this policy.



The government must improve the standard of living of individuals in order to reduce the riskiness of inflation.



Business community must use domestic produced goods rather than imported goods, this would help the infant industries to produce more commodities with lower prices and the purchasing power of the society will go up and the life style of the population will be better, this is will cause economic growth and the society will save money, which can create investment opportunities and new labor will be used and functioning resources will work



Business

community

should

improve

their

investment

capacity

for

increasing

employment activity in order to improve the standard of living. 

Business men should give care their community and charge as low prices as possible, the people of hargaisa and the other provinces are weakened by high prices of commodities, so the merchants or business community must think of their society and stop seeking high profits which effects the life style of the population and lower the prices as possible.

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Reference T. J. Sargent. and N. Wallace," Some Unpleasant Monetarist Arithmetic", Minneapolis, Federal Reserve Bank of Minneapolis, Journal of Quarterly Review 5, P 1-17, 1981. P. J. Montiel," Empirical Analysis of High-Inflation Episodes in Argentina and Brazil", Washington. D. C, International Monetary Fund (IMF), Staff Papers, 36 (3), P 527–549, 1989. D. Ricardo, Principles of Political Economy and Taxation, London, Murray Publication, 1817. Early Monetarists: Jean Bodin (1530-1596), John Locke (1632-1704), Henry Thornton and the English Balloonists, Simon Newcomb (1835-1909), Irving Fisher (1867-1947), James Laurence Laughlin (18501933), Henry C. Simons (1899-1946), James W. Angell (1898-1986) and etc. The Monetarists of the Chicago School : Milton Friedman (1912-. 2006), Anna J. Schwartz (1915- ), Philip Cogan (1927- ), Edmund S. Phelps(1933- ), Karl Brunner (1916-), Allan H. Meltzer (1928- ), David E.W. Ladler (1938-), Harry G. Johnson (1923-1979) and etc. M. Friedman and A .J. Schwartz, "A Monetary History of the United States, 1867-1960", Princeton, The Princeton University Press, 1963. J. M. Keynes," The General Theory of Employment, Interest, and Money", London, Macmillan Publication, 1936. Barnett, William A, Jia Liu, Ryan S. Mattson, and Jeff van den Noort. “The New CFS Divisia Monetary Aggregates: Design, Construction, and Data Sources.” Open Economies Review 24 (February 2013): 101-124. Barnett, William A. Getting It Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy. Cambridge: MIT Press, 2012. Belongia, Michael T. “Money Matters: Recent Results from Monetary Economics Reexamined.” Journal of Political Economy 104 (October 1996): 1065-1083. http://www.AmosWEB.com, AmosWEB LLC, 2000-2016. [Accessed: April 13, 2016]. http://www.economicsonline.co.uk/Global_economics/Inflation. THE IMPACT OF INFLATION ON STANDARD OF LIVING

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Ezirim, C. B., Muoghalu, M. I., and Elike, U. (2008). Inflation versus public expenditure growth in the US: An empirical investigation. North American Journal of Finance and Banking Research Vol. 2. No. 2. Kenneth Scheve, Inflation Aversion and the Political Economy of Macroeconomic Policymaking. International Organization. http://www.economicsdiscussion.net/inflation/inflation-types-causes-and-effects-withdiagram/6401 http://www.economicsonline.co.uk/Global_economics/Inflation. M. S. Goodfriend, "A Framework for the Analysis of Moderate Inflations", Elsevier, Elsevier, the Journal of Monetary Economics, 39(1), P 45-66, 1997. R. G. King., "The New IS-LM Model: Language, Logic, and Limits", Richmond, the Federal Reserve Bank of Richmond, Economic Quarterly Journal, 86 (3), P 45–103. http://www.economicsdiscussion.net/category/inflation For more information on the emergence of the literature on new political Macroeconomics, see; A. Alesina, and N. Roubini, "Political Cycles and the Macroeconomics", Cambridge, the MIT Press, (1997). A. Drazen, "Political Economy in Macroeconomics", Princeton, the Princeton University Press, 2000.

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Appendix 1: Questionnaire Dear Respondent, Am a student of as University currently undertaking a research on employee relationship and organizational performance? The study is in partial fulfillment of the academic requirements for Award of degree of Bachelor of Economics of as University. The questionnaire is purely for Academic purpose and the information provided shall be treated with utmost confidentiality. I kindly request you to spare a few minutes and fill this questionnaire as genuinely as possible. Thank you. GENERAL INFORMATION (Please circle the appropriate answer that best represents your opinion) 1. Age of the Respondent a. 18-25 b. 26-30 c. 31-40 d. Above 40 2. Gender of respondents a. Male b. Female 3. Marital statutes a. Single b. Married c. Widowed 4. Educational level a. Universities/College b. Secondary c. Primary and intermediate d. None 5. What is your occupation a. Government staff THE IMPACT OF INFLATION ON STANDARD OF LIVING

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b. Business man c. Self-employee d. Student e. Unemployed 6. The increase of the number of population has caused the inflation in this district: a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 7. Economic growth of Somaliland is an important factor that contributed the inflation in this country? a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 8. The merchants of Somaliland are derived the prices of commodities up without considering the welfare of their society? a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 9. Lack of role of ministry of commerce has encouraged the merchants to raise the price of products? a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 10. Lack of role of central bank and untaxed goods and services has encouraged merchants to take over price determination. a. Strongly Agree

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b. Agree c. Disagree d. Strongly Disagree

11. The huge imports of goods from the abroad have an impact of inflation to the economy. a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 12. Unstable exchange rate and the dollarized economy have also extreme effect to the high price of commodity of Hargeisa specially Ga’an Libah District: a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree

13. As far as the standard of living of households goes up also the prices of commodities go up: a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 14. The inflation hurts the life of groups in the society therefore the relationship between these variables is negative or inverse relationship: a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 15. The decline purchasing power is caused by the increasing prices and also THE IMPACT OF INFLATION ON STANDARD OF LIVING

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lack of investment in Somaliland: a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 16. Incomes of households are increasing positively for the last twenty years in Somaliland a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 17. There is no need of government policies to control inflation. e. Strongly Agree f. Agree g. Disagree h. Strongly Disagree 18. There is a different business owners who sell their products and services higher prices other than ordinary prices that led others to do the same. i. Strongly Agree j. Agree k. Disagree l. Strongly Disagree 19. Unexpected changes in the prices causes chaos in the local markets. a. Strongly Agree b. Agree c. Disagree d. Strongly Disagree 20. In your opinion, what are the corrective measures that you believe it can minimize the riskiness of inflation and in which way? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… THE IMPACT OF INFLATION ON STANDARD OF LIVING

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