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Stocks as Hedge against Inflation in Pakistan: Evidence from ARDL Approach

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  • Shahbaz, Muhammad
  • Islam, Faridul

Abstract

The paper implements ARDL bounds testing approach to cointegration to explore whether or not stocks are good hedge against inflation in the case of a transition economy such as Pakistan, using annual data for the period 1971 – 2008. Ng-Peron (2001) unit root test is applied to determine the stationarity of the series. The results suggest that stocks act as good hedge against inflation in Pakistan both in the long and the short run. The findings should help formulate appropriate policy to encourage investment in financial markets and thereby promote economic growth.

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File URL: http://mpra.ub.uni-muenchen.de/30970/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30970.

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Date of creation: 19 Nov 2010
Date of revision: 23 Mar 2011
Handle: RePEc:pra:mprapa:30970

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Keywords: Stock Returns; Inflation; ARDL Bounds Testing; Ng-Perron Test;

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