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Political instability and inflation in Pakistan

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  • Khan, Safdar Ullah
  • Saqib, Omar Farooq

Abstract

This study investigates the effects of political instability on inflation in Pakistan. Applying the Generalized Method of Moments technique and using data from 1951 to 2007, we examine this link through two different models. The results of the ‘monetary’ model suggest that the effects of monetary determinants are rather marginal and that they depend upon the political environment of Pakistan. The ‘nonmonetary’ model's findings explicitly establish a positive association between political instability and inflation. This is further confirmed through analysis based on interactive dummies that reveal political instability significantly leading to high (above average) inflation.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 22 (2011)
Issue (Month): 6 ()
Pages: 540-549

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Handle: RePEc:eee:asieco:v:22:y:2011:i:6:p:540-549

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Keywords: Political instability; Inflation; Pakistan;

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Cited by:
  1. Khani Hoolari, Seyed Morteza & Abounoori, Abbas Ali & Mohammadi, Teymour, 2014. "The Effect of Governance and Political Instability Determinants on Inflation in Iran," MPRA Paper 55827, University Library of Munich, Germany, revised Mar 2014.
  2. Syed Ozair Ali, 2012. "Power, Profits and Inflation: A Study of Inflation and Influence in Pakistan," Working Papers id:4693, eSocialSciences.
  3. Haider, Adnan & Din, Musleh ud & Ghani, Ejaz, 2011. "Consequences of Political Instability, Governance and Bureaucratic Corruption on Inflation and Growth: The Case of Pakistan," MPRA Paper 35584, University Library of Munich, Germany.
  4. Naz, Farah & Mohsin, Asma & Zaman, Khalid, 2012. "Exchange rate pass-through in to inflation: New insights in to the cointegration relationship from Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2205-2221.
  5. Paresh Kumar Narayan & Russell Smyth, 2011. "Has political instability contributed to price clustering on Fiji's stock market?," Financial Econometics Series 2011_03, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.

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