Determinants oF Recent Inflation in Pakistan
AbstractThe expansionary economic policies of the government and of the central bank (State Bank of Pakistan – SBP), which on one side resulted in impressive economic performance, stimulated a rise in the Consumer Price Index (CPI) on the other. This initiated a debate on the determinants of the recent inflation. Some blamed fiscal policy or monetary policy, while others blamed imported inflation, administered prices or mismanagement and loose control of the government. This study, adopting an econometric framework, focuses on the identification of the main determinants of recent inflation trends. Using data from the 1972-73 to 2005-06 period, applying ordinary least square method and verifying results through Breusch-Godfrey Serial Correlation LM and Augmented Dickey-Fuller tests, it finds that the most important determinants of inflation in 2005-06 were adaptive expectations, private sector credit and rising import prices. Whereas, the fiscal policy’s contribution to inflation was minimal.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16254.
Date of creation: 2007
Date of revision: 2007
Fiscal policy; monetary Policy; Inflation; Determinants;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- M. Aynul Hasan & Qazi Masood Ahmed, 1991. "Endogeneity of Monetary Policy Reaction Function: An Experience from Pakistan's Economy," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 30(4), pages 931-941.
- Scheibe, Jörg & Vines, David, 2005. "A Phillips Curve for China," CEPR Discussion Papers 4957, C.E.P.R. Discussion Papers.
- Easterly, William & Fischer, Stanley, 2001.
"Inflation and the Poor,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 33(2), pages 160-78, May.
- Mohsin S. Khan & Axel Schimmelpfennig, 2006. "Inflation in Pakistan: Money or Wheat?," IMF Working Papers 06/60, International Monetary Fund.
- International Monetary Fund, 2005. "Three Attempts at Inflation Forecasting in Pakistan," IMF Working Papers 05/105, International Monetary Fund.
- Schwartz, Anna J, 1973.
"Secular Price Change in Historical Perspective,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 5(1), pages 243-69, Part II F.
- M. Aynul Hasan & Ashfaque H. Khan & Hafiz A. Pasha & M. Ajaz Rasheed, 1995. "What Explains the Current High Rate of Inflation in Pakistan?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 927-943.
- Jeannine Bailliu & Daniel Garcés & Mark Kruger & Miguel Messmacher, 2003. "Explaining and Forecasting Inflation in Emerging Markets: The Case of Mexico," Working Papers 03-17, Bank of Canada.
- Friedman, Milton, 1971. "A Monetary Theory of Nominal Income," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 323-37, March-Apr.
- Francisco Nadal-De Simone, 2000. "Forecasting Inflation in Chile Using State-Space and Regime-Switching Models," IMF Working Papers 00/162, International Monetary Fund.
- Saira Tufail & Sadia Batool, 2013. "An Analysis of the Relationship between Inflation and Gold Prices: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 18(2), pages 1-35, July-Dec.
- Khatun, Fahmida & Ahamad, Mazbahul G., 2012. "Investigating the determinants of inflationary trends in Bangladesh: an ARDL bounds F-Test Approach," MPRA Paper 42572, University Library of Munich, Germany.
- Hassan, Syeda Anam & Zaman, Khalid, 2012. "Effect of oil prices on trade balance: New insights into the cointegration relationship from Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2125-2143.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.