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Is Inflation in Pakistan a Monetary Phenomenon?

  • M. Ali Kemal

    (Pakisatn Institute of Development Economics, Islamabad.)

The paper finds that an increase in money supply over the long-run results in a higher rate of inflation and thus provides support for the quantity theory of money. It establishes that inflation is essentially a monetary phenomenon. However, the money supply does not instantly influence the price levels; the impact of money supply on inflation has a considerable lag of about 9 months. While the study shows that the money supply works through the system in less than a year, it also points out that the system takes rather long to converge to equilibrium if shocks appear in any of the three variables, viz., GDP, money supply, and prices.

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File URL: http://www.pide.org.pk/pdf/PDR/2006/Volume2/213-220.pdf
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Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 45 (2006)
Issue (Month): 2 ()
Pages: 213-220

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Handle: RePEc:pid:journl:v:45:y:2006:i:2:p:213-220
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  1. 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.
  2. 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, 06.
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