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Three Attempts At Inflation Forecasting in Pakistan

  • International Monetary Fund

This paper presents three empirical approaches to forecasting inflation in Pakistan. The preferred approach is a leading indicators model in which broad money growth and private sector credit growth help forecast inflation. A univariate approach also yields reasonable forecasts, but seems less suited to capturing turning points. A vector autoregressive (VAR) model illustrates how monetary developments can be described by a Phillips-curve type relationship. We deal with potential parameter instability on account of fundamental changes in Pakistan''s economic system by restricting our sample to more recent observations. Gregorian and Islamic calendar seasonality are addressed by using 12-month moving averages.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/105.

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Length: 37
Date of creation: 01 May 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/105
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  9. Francisco Nadal-De Simone, 2000. "Forecasting Inflation in Chile Using State-Space and Regime-Switching Models," IMF Working Papers 00/162, International Monetary Fund.
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  14. Syed Muhammad Tariq & Kent Matthews, 1997. "The Demand for Simple-sum and Divisia Monetary Aggregates for Pakistan: A Cointegration Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(3), pages 275-291.
  15. Zulfiqar Hyder & Sardar Shah, 2005. "Exchange Rate Pass-Through to Domestic Prices in Pakistan," Macroeconomics 0510020, EconWPA.
  16. Jeannine Bailliu & Daniel Garcés & Mark Kruger & Miguel Messmacher, 2003. "Explaining and Forecasting Inflation in Emerging Markets: The Case of Mexico," Working Papers 03-17, Bank of Canada.
  17. Daniel Leigh & Marco Rossi, 2002. "Leading Indicators of Growth and Inflation in Turkey," IMF Working Papers 02/231, International Monetary Fund.
  18. SHAHEENA NISAR & NAHEED AsLAM, 1983. "The Demand for Money and the Term Structure of Interest Rates in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 22(2), pages 97-116.
  19. Ehsan U. Choudhri & Mohsin S. Khan, 2002. "The Exchange Rate and Consumer Prices in Pakistan: Is Rupee Devaluation In Inflationary?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 41(2), pages 107-120.
  20. Price, Simon & Nasim, Anjum, 1998. "Modelling inflation and the demand for money in Pakistan; cointegration and the causal structure," Economic Modelling, Elsevier, vol. 16(1), pages 87-103, January.
  21. Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, vol. 41(7), pages 1375-1401, July.
  22. M Aynul Hasan & S. Ghulam Kadir & S. Fakhre Mahmud, 1988. "Substitutability of Pakistan's Monetary Assets under Alternative Monetary Aggregates," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 27(3), pages 317-326.
  23. Goodhart, Charles & Hofmann, Boris, 2000. "Do Asset Prices Help to Predict Consumer Price Inflation?," Manchester School, University of Manchester, vol. 68(0), pages 122-40, Supplemen.
  24. Akhtar Hossain, 1994. "The Search for a Stable Money Demand Function for Pakistan: An Application of the Method of Cointegration," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 33(4), pages 969-983.
  25. Ahmad, Mushtaq & Khan, Ashfaque H., 1990. "A reexamination of the stability of the demand for money in pakistan," Journal of Macroeconomics, Elsevier, vol. 12(2), pages 307-321.
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