RESEARCH ARTICLE MODELING THE DETERMINANTS OF INFLATION IN SUDAN USING GENERALIZED METHOD OF MOMENTS FOR THE PERIOD 2000-2017 1* Almahdi Musa Attahir Musa and 2* Faroug Mohammed Khalid Yousif 1 Almahdi Musa Attahir Musa , Associate Professor of Econometrics, Department of Econometrics and Social Statistics, Faculty of Economics and Administrative Sciences, University of Bakht Al -Ruda, Sudan 2 Faroug Mohammed Khalid Yousif, Assistant Professor of Econometrics, Wadmdni, Aljazira, Sudan ARTICLE INFO ABSTRACT This paper aims to modeling the determinants of inflation in Sudan via GMM method for the period 2000-2017to help in formulating an effective decreasing inflation rate policy. The paper focused on Gross Domestic Product (GDP), Government Expenditure(GE), Exchange Rate (EX), Consumer Price Index (CPI), Unemployment Rate (UR),and Money Supply (MS)as they are the most important determinants of inflation in Sudan. The paper is based on the following assumptions: the Gross Domestic Product, Unemployment Rate and Government Expenditure well effect negatively on inflation rate, and also there is effect positively between the Inflation Rate and Exchange Rate, Money Supply, and Consumer Price Index. The paper has reached the following conclusions: that the increase in money supply and Consumer Price Index lead to an increasing inflation rate. The reduction of the exchange rate leads to a high rate of inflation. However the increasing in Gross Domestic Product, Unemployment Rate, and Government Expenditure lead to decreasing inflation rate in Sudan. The Generalized Method of Moment is the best Method for estimating the determinants of inflation in Sudan. The paper recommended that the state should adopt effective financial and monetary policy for reducing the increasing in inflation rate and increased production for exporting. Copyright © 2018, Almahdi Musa Attahir Musa and Faroug Mohammed Khalid Yousif. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution and reproduction in any medium, provided the original work is properly cited. INTRODUCTION Inflation can be defined as sustained increase in the aggregate or general price level in an economy which mean that there is an increase in the cost of living. Inflation is also known as the percentage change in the value of the Consumer Price Index (CPI) on a year-on year basis. It can be said that inflation is a continuous issue in all nation in maintaining low living cost, high growth, health economy and as aimed to policy makers’ decision. Inflation provides positive and negative impact depending on a country economic condition (Audrey et al., 2007). On the other hand, a moderate level of inflation characterizes a good economy. The rate of 2 or 3% of inflation is beneficial for an economy as it encourages people to buy or borrow more, because during times of lower inflation, the level of interest rate also remains low. However, inflation has its worst impact towards consumers. High prices from day today goods make it difficult for consumers to afford even for the basic commodities in daily life which will disrupts the smooth functioning of a market economy (Kurgan, 1995). The higher income will lead to higher inflation. *Corresponding author: Almahdi Musa Attahir Musa, Almahdi Musa Attahir Musa, Associate Professor of Econometrics, Department of Econometrics and Social Statistics, Faculty of Economics and Administrative Sciences, University of Bakht Al - Ruda, Sudan. Hence, the government tries to keep inflation under control and moving forward to achieve low or zero inflation. Based on previous researchers, there are quite a number of arguments on the precise relationship between inflation and economic indicators at the macroeconomic level (Philip Chimobi, 2010) Money supply is one of the determinants that affect inflation in Malaysia (Cheng and Tan, 2015; Wimal Rankaduwa, 2005) agreed that, there is a positive relationship between money supply and inflation. Besides, another economic indicator closely related to both money supply and inflation is the national income or the Gross Domestic Product (Maymunah et al., 2005) Various studies done on determinants of inflation, focusing on independent variables such as unemployment rate, exchange rate, oil prices (Chong and Tan, 2012) and income (Nadeem et al., 1992) However, less studies done on relationship between Gross Domestic Product, Money Supply, Interest Rate, Import Goods and Services, and Government Expenditure with inflation. Therefore, this study will concentrate on the Sudanese economy concept on which Determinants will effect to increase inflation. The variables selected are Gross Domestic Product, Money Supply, unemployment rate, and exchange rate. International Journal of Information Research and Review Vol. 05, Issue, 02, pp.5154-5165, February, 2018 Article History: Received 15 th November, 2017 Received in revised form 19 th December, 2017 Accepted 26 th January, 2018 Published online 28 th February, 2018 International Journal of Information Research and Review, February, 2018 Keywords: Determinants, Inflation Rate, GMM, Money Supply, Government Expenditure.