Significant Shift in Causal Relations of Money, Income, and Prices in Pakistan: The price Hikes in the Early 1970s
AbstractThis study extends the analysis of casuality by Husain and Rashid by taking care of the shift in the variables due to the price hikes in the early 1970s. We investigate the casual relations between real money and real income, between nominal money and nominal income, and between nominal money and prices using using the annual data set from 1959-60 to 2003-04, examining the stochastic properties of the variables used in the analysis and taking care of the expected shifts in the series through dummies. The analysis indicates significant shifts in the variables during the sample period. In this context, the shift of the early 1970s seems to be more important to be incorporated in the analysis. The study finds an active role of money in the Pakistani economy, as it is found to be the leading variable in changing prices without any feed back. In the case of income, the study finds the feed back mechanism of money, which is generally missing in the earlier studies probably because of not taking care of the shift in the macroeconomic variables in Pakistan in the early 1970s.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2243.
Date of creation: 2006
Date of revision:
Money; Income; Prices; Price hikes; Casual relations; Pakistan;
Other versions of this item:
- Fazal Husain & Abdul Rashid, 2006. "Significant Shift in Causal Relations of Money, Income, and Prices in Pakistan: The price Hikes in the Early 1970s," PIDE-Working Papers 2006:8, Pakistan Institute of Development Economics.
- Fazal Husain & Abdul Rashid, 2006. "A Significant Shift in Causal Relations of Money, Income, and Prices in Pakistan : The Price Hikes in the Early 1970s," Macroeconomics Working Papers 22229, East Asian Bureau of Economic Research.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- N4 - Economic History - - Government, War, Law, International Relations, and Regulation
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-17 (All new papers)
- NEP-HIS-2007-03-17 (Business, Economic & Financial History)
- NEP-MAC-2007-03-17 (Macroeconomics)
- NEP-MON-2007-03-17 (Monetary Economics)
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.:
- James R. Barth & James T. Bennett, 1974. "The Role of Money in the Canadian Economy: An Empirical Test," Canadian Journal of Economics, Canadian Economics Association, vol. 7(2), pages 306-11, May.
- Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
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