THE DETERMINANTS OF CONSUMER PRICE INDEX IN KOSOVO

Abstract

Using Consumer Price Index, the health of the economy can be in control and the state can take necessary preventive measures otherwise not taken could lead to devastating effects in the form of high unemployment, bankruptcies and major financial losses. This study uses quarterly data of Kosovo from 2006 to 2018. Quarterly data is taken from Central Bank of Kosovo, Agency of Statistics of Kosovo and Ministry of Finance version which include Consumer Price Index, Money Supply, Gross Domestic Product, and Interest Rate. Data analysis will be carried out with the Statistical Packages for Social Sciences (SPSS). The data have been analyzed with multiple regressions method, using namely Pearson’s correlations, Multicolinearity, One-Way ANOVAs, F-test, and T-tests. We found that there is strong relationship between consumer price index (CPI) and GDP. When the Gross Domestic Product (GDP) increases, it will also increase consumer price index as these two have linear relationship. Also there is strong correlation between money supply and consumer price index, which means that the mean of CPI increases when money supply increases. However, there is negative correlation between interest rate and CPI, when interest rate increases, CPI decreases