CONSUMER PRICE INDEX (CPI) AS A COMPETITIVENESS INFLATION MEASURE: EVIDENCE FROM JORDAN

Abstract

The purpose of this paper is to investigate the Consumer Price Index (CPI) as a competitiveness inflation measure and to determine whether an empirical relationship exists between the rates of inflation represented in CPI and the level of the real exchange rate. In order to achieve the objectives of this paper, the study calculated the consumer price index (CPI) as an inflation rate for the period 2010-2018, and also adopted the real exchange rates for the same period. In order to achieve the objectives of the study, a Pearson correlation analysis between the average CPI rates, and the average exchange rate were conducted. The outcomes of the correlation analysis conducted reflect a negative correlation of 62% between the exchange rates and the CPI’s inflation rates, which means that when CPI rates cause direct opposite effect of the determination level of exchange rates on the Jordanian economy.