Is there unidirectional causality from money to inflation? This question was examined by using Pakistan as a case study for a developing country. In this paper money was found to be endogenous in Pakistan, and both narrow and broad money indicate a bi-directional relationship with inflation. The causal inferences were examined using alternate causality tests, different prewhitening filters, and different proxies for money and inflation; all of which have direct bearing on the causal inferences. The estimated money inflation feedbacks were interpreted to be "caused” by the link of money and inflation with government budget deficits, balance of payments adjustments and suppressed interest rates. [310]
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