IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/16293.html
   My bibliography  Save this paper

Impact of Supply of Money on Food and General Price Indices: A Case of Pakistan

Author

Listed:
  • Khan, Rana Ejaz Ali
  • Gill, Abid Rashid

Abstract

The paper probed the impact of supply of money on food and general price indices by estimating a series of equations taking CPI food, CPI general, WPI food, WPI general, GDP deflator and SPI as measures of inflation and M1, M2 and M3 supply of money as explanatory variables. For analysis, OLS technique is used covering time series data for the years 1975-76 to 2006-07 that was made stationary by Durbin-Watson criterion. AR (1) is used to check autocorrelation. The results for CPI food, CPI general, WPI general, GDP deflator and SPI show that they are negatively related with M1 supply of money. CPI food, CPI general, WPI general, GDP deflator, and SPI are also negatively related with M2 supply of money. The results show that CPI food, CPI general, WPI general, GDP deflator and SPI are positively related with M3 supply of money. It may be concluded that supply of money M1 and M2 affects the food and general indices in the same way. However, M1 supply of money affects the CPI general strongly than CPI food.

Suggested Citation

  • Khan, Rana Ejaz Ali & Gill, Abid Rashid, 2007. "Impact of Supply of Money on Food and General Price Indices: A Case of Pakistan," MPRA Paper 16293, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:16293
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/16293/1/MPRA_paper_16293.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Md. Akhtar Hossain, 1986. "Monetary Disequilibrium and Inflation. A Monetary Model of Inflation in Pakistan, 1963-82," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 25(2), pages 141-162.
    2. Jeff Fuhrer & George Moore, 1995. "Inflation Persistence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 127-159.
    3. Ather H. Akbari & Wimal Rankaduwa, 2006. "Inflation Targeting in a Small Emerging Market Economy: The Case of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 169-190.
    4. Khan, Mahmood ul Hasan & Hussain, Fida, 2005. "Monetary aggregates in Pakistan: theoretical and empirical underpinnings," MPRA Paper 31430, University Library of Munich, Germany, revised 2005.
    5. Fazal Husain & Tariq Mahmood, 1998. "Causality between Money and Prices: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(4), pages 1155-1161.
    6. Muhammad Nadim Hanif & Muhammad Jahanzeb Malik, 2015. "Evaluating the Performance of Inflation Forecasting Models of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 11, pages 43-78.
    7. Asif Idrees Agha & Noor Ahmed & Yasir Ali Mubarik & Hastam Shah, 2005. "Transmission Mechanism of Monetary Policy in Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 1, pages 1-23.
    8. Mohsin S. Khan & Axel Schimmelpfennig, 2006. "Inflation in Pakistan: Money or Wheat?," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 213-234..
    9. Paul De Grauwe & Magdalena Polan, 2005. "Is Inflation Always and Everywhere a Monetary Phenomenon?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 239-259, June.
    10. 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.
    11. By Mohsin S. Khan & Abdelhak S. Senhadji, 2001. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-1.
    12. Noor Ahmed & Hastam Shah & Asif Idrees Agha & Yasir Ali Mubarik, 2005. "Transmission Mechanism of Monetary Policy in Pakistan," SBP Working Paper Series 09, State Bank of Pakistan, Research Department.
    13. Robert D. Dittmar & William T. Gavin & Finn E. Kydland, 2005. "Inflation Persistence And Flexible Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 245-261, February.
    14. Faiz Bilquees, 1988. "Inflation in Pakistan: Empirical Evidence on the Monetarist and Structuralist Hypotheses," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 27(2), pages 109-129.
    15. Abdul Qayyum, 2006. "Money, Inflation, and Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(2), pages 203-212.
    16. Nadeem Ul Haque & Abdul Qayyum, 2006. "Inflation Everywhere is a Monetary Phenomenon: An Introductory Note," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(2), pages 179-183.
    17. Fuhrer, Jeffrey C., 2010. "Inflation Persistence," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 9, pages 423-486, Elsevier.
    18. Yasir Ali Mubarik, 2005. "Inflation and Growth: An Estimate of the Threshold Level of Inflation in Pakistan," SBP Working Paper Series 08, State Bank of Pakistan, Research Department.
    19. Ahmed M. Khalid, 2005. "Economic Growth, Inflation, and Monetary Policy in Pakistan: Preliminary Empirical Estimates," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 961-974.
    20. Mohsin S. Khan & Axel Schimmelpfennig, 2006. "Inflation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(2), pages 185-202.
    21. Ashfaque H. Khan & Mohammad Ali Qasim, 1996. "Inflation in Pakistan Revisited," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 35(4), pages 747-759.
    22. Yasir Ali Mubarik, 2005. "Inflation and Growth: An Estimate of the Threshold Level of Inflation in Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 1, pages 35-44.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Choudary Ihtasham Ali & Sami Ullah & Umar Ijaz Ahmed & Irfan Ahmad Baig & Muhammad Arqam Iqbal & Amjad Masood, 2022. "Can Food Inflation Be Stabilized By Monetary Policy? A Quantile Regression Approach," Journal of Economic Impact, Science Impact Publishers, vol. 4(3), pages 205-212.
    2. CHINEZELUM Ezebilo & AKANEGBU Benedict & MUHAMMAD Maimuna Yakubu, 2023. "Effect of Monetary Policy on Food Inflation in Nigeria: A Nardl Structural Approach," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(5), pages 1-6.
    3. Hayat, Zafar & Balli, Faruk & Rehman, Muhammad, 2017. "The relevance and relative robustness of sources of inflation bias in Pakistan," Economic Modelling, Elsevier, vol. 63(C), pages 283-303.
    4. Henna Ahsan & Zainab Iftikhar & M. Ali Kemal, 2011. "The Determinants of Food Prices: A Case Study of Pakistan," PIDE-Working Papers 2011:76, Pakistan Institute of Development Economics.
    5. Uddin , Ijaz, 2020. "What determine inflation in Pakistan: an investigation through structural equation modeling by using time series data for a period from 1975 to 2017," Economic Consultant, Roman I. Ostapenko, vol. 32(4), pages 54-72.
    6. Fayyaz Hussain & Zafar Hayat, 2016. "Do Inflation Expectations Matter for Inflation Forecastability: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(3), pages 211-225.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Khan, Safdar Ullah & Saqib, Omar Farooq, 2011. "Political instability and inflation in Pakistan," Journal of Asian Economics, Elsevier, vol. 22(6), pages 540-549.
    2. Mehak Moazam & M. Ali Kemal, 2016. "Inflation in Pakistan: Money or Oil Prices," Working Papers id:11507, eSocialSciences.
    3. Mohsin S. Khan, 2009. "The Design and Conduct of Monetary Policy: Lessons for Pakistan (The Quaid-i-Azam Lecture)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 48(4), pages 337-356.
    4. Syed Kumail Abbas Naqvi & Bushra Naqvi, 2010. "Asymmetric Behavior of Inflation Uncertainty and Friedman-Ball Hypothesis: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(2), pages 1-33, Jul-Dec.
    5. S. Adnan & H.A.S. BUKHARI & Safdar Ullah KHAN, 2008. "Does Volatility In Government Borrowing Leads To Higher Inflation? Evidence From Pakistan," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(3(5)_Fall), pages 187-202.
    6. 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.
    7. Rizvi, Syed Kumail Abbas & Naqvi, Bushra, 2008. "Asymmetric Behavior of Inflation Uncertainty and Friedman-Ball Hypothesis: Evidence from Pakistan," MPRA Paper 19488, University Library of Munich, Germany.
    8. Nicas Yabu & Nicholaus J. Kessy, 2015. "Appropriate Threshold Level of Inflation for Economic Growth: Evidence from the Three Founding EAC Countries," Applied Economics and Finance, Redfame publishing, vol. 2(3), pages 127-144, August.
    9. Rizvi, Syed Kumail Abbas & Naqvi, Bushra, 2009. "Inflation Volatility: An Asian Perspective," MPRA Paper 19489, University Library of Munich, Germany.
    10. Sumera Arshad & Amajd Ali, 2016. "Trade-off between Inflation, Interest and Unemployment Rate of Pakistan: Revisited," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 5(4), pages 193-209, December.
    11. Siffat Mushtaq & Abdul Rashid & Abdul Qayyum, 2012. "On the Welfare Cost of Inflation: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(1), pages 61-96.
    12. Nazir, Sidra & Saeed, Saira & Muhammad, Atta, 2017. "Threshold Modeling for Inflation and GDP Growth," MPRA Paper 79649, University Library of Munich, Germany.
    13. Khan, Mahmood ul Hassan & Hanif, Muhammad Nadim, 2012. "Role of Demand and Supply Shocks in Driving Inflation: A Case Study of Pakistan," MPRA Paper 48884, University Library of Munich, Germany.
    14. Mohsin S. Khan & Axel Schimmelpfennig, 2006. "Inflation in Pakistan: Money or Wheat?," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 213-234..
    15. Nadia Saleem, 2008. "Measuring Volatility of Inflation in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 13(2), pages 99-128, Jul-Dec.
    16. Khalid Mushtaq & Abdul Ghafoor & Abedullah & Farhan Ahmad, 2011. "Impact of Monetary and Macroeconomic Factors on Wheat Prices in Pakistan: Implications for Food Security," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(1), pages 95-110, Jan-Jun.
    17. Sadia Tahir, 2006. "Core Inflation Measures for Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 319-342.
    18. Arif Khan & Gul Zeb Chaudhary, 2020. "Determinants Of Inflation In Case Of Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 9(4), pages 151-161, December.
    19. Abdul Qayyum, 2006. "Money, Inflation, and Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(2), pages 203-212.
    20. Muhammad Nadim Hanif & Muhammad Jahanzeb Malik, 2015. "Evaluating the Performance of Inflation Forecasting Models of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 11, pages 43-78.

    More about this item

    Keywords

    Inflation; Money supply; Consumer Price Index; Food prices; Sensitive Price Indicator.;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:16293. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.