Credit to the economy and inflation in Burundi

The objective of this study is to analyze the causal relationship between credits to the economy and inflation. This analysis was done on the basis of stationarity tests, JOHANSEN co-integration and causality in the sense of GRANGER from statistical data on economic credits and inflation over the period from 1980 to 2010 in Burundi.The results of the study show that there is a correlation between credit to the economy and inflation. The results also show that there is no long term dynamic between credit to the economy and inflation. Moreover, there is a unidirectional relationship from credit to the economy to inflation.Finally, the results show that credit to the economy in Burundi, one of the important components of the money supply have effects that lead to inflation. This is due to the fact that a growth in money supply does not necessarily influence production.