Impact of Consumer Price Index and Gross Domestic Saving on Economic Growth in Sri Lanka: An Econometric Analysis Using Johansen Co-Integration Approach

Abstract

Introduction One of the important contributors to economic growth is Gross domestic product (GDP). The GDP is a monetary measure of the market value of all final goods and services produced in a specific period of time. Contemporary, the Sri Lankan economy has revealed a robust raising trend with per capita GDP reaching almost $4,000. Sri Lankan government has been implementing privatization and an open economy for worldwide competition which inspiring overseas investments from 1977. Resulting to the controlling of the leftist Janatha Vimukhti Peramuna (JVP), reforms and privatization attained a major enhancement and strain on growth due to export additionally aided in refreshing the performance of economy accelerating GDP growth attains to 7% in 1993. Some of the major international companies have realised the growth potential of Sri Lanka and made huge investments. In the subsequent years the Sri Lankan economy observed many disturbances resulting in irregular growth of economy but the overall mean yearly GDP growth was at 5.2% in 1999-2000.However, after independence, the first reduction in GDP was negative 1.4 in 2001.A sequence of universal and national economic complications such as terrorist assaults within Sri Lanka and international influences smashed the economy. The end of year 2001, the political managements was reformed by the parliamentary elections, that the Freedom Party of Sri Lanka retained the Premiership. After the alteration in administration the country acquired a progressive improvement in the economy. The economy profited from lower interest rates from 2002 to 2004,retrieval in domestic demand, improved tourist arrivals, a restoration of the stock exchange, and amplified foreign direct investment. Economic growth reached 4% in 2002, aided by strong sector growth. The recommencement of the civil war in 2005 directed to a sudden increase in security expenses. However, the economy began to grow in the year 2010 at an advanced rate of 8.0% as per the civil war finished in May 2009 and attained 9.1% in 2012, but again in 2013 fell to 3.4% and only marginally improved to 4.5% in 2014.These fluctuations of GDP growth rate were mainly caused due to the direct effects of consumer price index, gross domestic saving, money supply, government expenditure, exchange rate, exports prices of imports, interest rate, tax revenue etc. on gross domestic product due to the unstable circumstances of the country.

The Impacts and Determinants of Inward Foreign Direct Investment on Economic Growth in Thailand

“…This is different from Lamah, Yanto and Setyadharma (2021) who found that CPI has no significant influence in Indonesian economy at all. However, the result suggests that CPI can speed up the economic growth via gross domestic saving (GDS) (Aboobucker & Jahufer, 2018).…”