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Political Instability and Inflation in Pakistan

  • Khan, Safdar Ullah
  • Saqib, Omar Farooq

This study investigates the effects of political instability on inflation in Pakistan. Applying the Generalized Method of Moments and using data from 1951-2007, we examine this link in two different models. The results of the ‘monetary’ model suggest that the effects of monetary determinants are rather marginal and that they depend upon the political environment of Pakistan. The ‘nonmonetary’ model’s findings explicitly establish a positive association between measures of political instability and inflation. This is further confirmed on analyses based on interactive dummies that reveal political instability significantly leading to high (above average) inflation.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13056.

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Date of creation: 15 Nov 2008
Date of revision: 02 Jan 2009
Handle: RePEc:pra:mprapa:13056
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