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

Admas 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 Admas 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 supporter all my life and who helped me begin my educational journey and support
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, supported 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 ADMAS
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, Admas 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

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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

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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

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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

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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 passes 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 terms 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 terms 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, and there is no controlling
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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

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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. Germany 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 accounted from natural properties of discipline
based on market. Therefore, in one period of prosperity it is completely natural. According to demand-
pull 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

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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
administered price of their products. Profit-push inflation is therefore called administered-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 account 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 account 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.

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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

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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

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of living is largely based on two factors: your income and your expenses. Inflation occurs when day-
to-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 members 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 Population Sample Size Sampling Method

Respondents
Ga’an Libah >55000 70 Simple Random Sampling
District
Istanbul Refugee 40 15 Simple Random Sampling
Camp
Other Districts 10 11 Simple Random Sampling
Total >55000 96

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 well-
prepared 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
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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 terms 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 16 16.7
26-30 28 29.2
31-40 23 24.0
Above 40 29 30.2
Gender
Male 51 53.1
Female 45 46.9
Marital status
Single 30 31.3
Married 50 51.2
Widowed 16 16.7
Educational level
University 22 22.9
Secondary 24 25.0
Primary 21 21.9
None 29 30.2
Occupation
Gov’t staff 5 5.2
Business man 31 32.3
Self-employee 21 21.9
Student 8 8.3
Unemployed 31 32.3
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

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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

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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

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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

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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

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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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diagram/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.

THE IMPACT OF INFLATION ON STANDARD OF LIVING Page 34

 Appendix 1: Questionnaire
Dear Respondent,

Am a student of Admas 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 Admas 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 Page 35

 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

THE IMPACT OF INFLATION ON STANDARD OF LIVING Page 36

 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 Page 37

 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 Page 38