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Does Volatility in Government Borrowing Leads to Higher Inflation? Evidence from Pakistan

  • Haider, Adnan
  • Khan, Safdar Ullah

This study analyzes the impact of volatility in government borrowing from central bank (GBCB) on domestic inflation in Pakistan. This paper utilizes Generalized Auto Regressive Conditional Hetroskedasticity (GARCH) model to estimate volatility in GBCB using monthly data from July 1992 to June 2007. The empirical results, based on auto regressive distributed lag (ARDL) with bound testing technique suggest that domestic inflation in Pakistan is related with volatility in government borrowing from central bank in the long run. Furthermore, error correction model (ECM) estimates show that in the short run, inflation is also affected by volatility in GBCB.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17008.

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Date of creation: 05 Dec 2007
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Publication status: Published in Journal of Applied Economic Sciences 5.2008(2008): pp. 187-202
Handle: RePEc:pra:mprapa:17008
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