Measuring Volatility of Inflation in Pakistan
The available evidence in Pakistansuggests that inflation is a monetary phenomena. This paper examines the relationship between the determinants of inflation and its volatility by using monthly data for 1990:M1-2007:M5. The determinants of inflation are estimated by a VAR analysis, which shows that inflation, the interest rate and money supply move together. A VAR model assumes constant error variance. We relaxed this assumption by employing an ARCH/GARCH model and conclude that inflation is volatile in nature. For measuring the qualitative nature of the inflationary process we used an EGARCH model. It confirms that the time effect model is significant. It also suggests that in the first four months of the calendar year, the inflationary shock is negative and it can, therefore, hamper growth.
Volume (Year): 13 (2008)
Issue (Month): 2 (Jul-Dec)
|Contact details of provider:|| Postal: |
Phone: (92-42) 6560939
Web page: http://www.lahoreschoolofeconomics.edu.pk/EconomicsJournal/LJEIntro.aspx
More information through EDIRC
References listed on IDEAS
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.:
- Svensson, L-E-O, 1996.
"Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets,"
615, Stockholm - International Economic Studies.
- Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
- Svensson, Lars E.O., 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Seminar Papers 615, Stockholm University, Institute for International Economic Studies.
- Lars E. O. Svensson, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," NBER Working Papers 5797, National Bureau of Economic Research, Inc.
- Svensson, Lars E O, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," CEPR Discussion Papers 1511, C.E.P.R. Discussion Papers.
- Lars E O Svensson, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Bank of England working papers 56, Bank of England.
- Allan D. Brunner & David P. Simon, 1995.
"Excess returns and risk at the long end of the Treasury market: an EGARCH-M approach,"
International Finance Discussion Papers
522, Board of Governors of the Federal Reserve System (U.S.).
- Brunner, Allan D & Simon, David P, 1996. "Excess Returns and Risk at the Long End of the Treasury Market: An EGARCH-M Approach," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 19(3), pages 443-57, Fall.
- Frederic S. Mishkin & Adam S. Posen, 1997.
"Inflation targeting: lessons from four countries,"
Economic Policy Review,
Federal Reserve Bank of New York, issue Aug, pages 9-110.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Elder, John, 2004. "Another Perspective on the Effects of Inflation Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(5), pages 911-28, October.
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
- Qayyum, Abdul, 2006.
"Money, Inflation, and Growth in Pakistan,"
2055, University Library of Munich, Germany, revised 2006.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- 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.
- Husain, Fazal & Mahmood, Tariq, 1998.
"Causality between Money and Prices:Evidence from Pakistan,"
2720, University Library of Munich, Germany.
- 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.
- Husain, Fazal & Mahmood, Tariq, 1998. "Causality Between Money and Prices: Evidence from Pakistan," MPRA Paper 5021, University Library of Munich, Germany.
- International Monetary Fund, 2005. "Three Attempts At Inflation Forecasting in Pakistan," IMF Working Papers 05/105, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:lje:journl:v:13:y:2008:i:2:p:99-128. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shahid Salahuddin)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.