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Inflation, Income Inequality and Economic Growth in Pakistan: A Cointegration Analysis

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  • Ali, Sharafat

Abstract

The study is an attempt to explore the impact of inflation and income inequality in Pakistan. The study also analyzes the effect of foreign direct investment, workers’ remittances and manufacturing value added on growth. Annual time series data from 1972 to 2007 was used for the analysis. After finding all of the time series stationary at first difference, Johansen cointegration approach and vector error correction models are applied for the long run and short run analysis, respectively. The cointegration test results confirmed growth increasing impact of income inequality in Pakistan. Foreign direct investment, remittances and manufacturing valued added are found to have positives and significant impact on growth in Pakistan. The study also suggests some policy implications.

Suggested Citation

  • Ali, Sharafat, 2014. "Inflation, Income Inequality and Economic Growth in Pakistan: A Cointegration Analysis," MPRA Paper 53706, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53706
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    References listed on IDEAS

    as
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    Cited by:

    1. Sharafat, Ali & Hamid, Waqas & Muhammad, Asghar & Raheel Abbas, Kalroo & Muhammad, Ayaz & Mukhtyar, Khan, 2013. "Foreign Capital and Investment in Pakistan: A Cointegration and Causality Analysis," MPRA Paper 55640, University Library of Munich, Germany, revised 28 Apr 2013.
    2. Nazir, Sidra & Saeed, Saira & Muhammad, Atta, 2017. "Threshold Modeling for Inflation and GDP Growth," MPRA Paper 79649, University Library of Munich, Germany.
    3. Jibran Hussain & Sallahuddin Hassan, 2019. "Oil Prices Dynamics and the State of Energy Crisis in Pakistan," Pakistan Journal of Humanities and Social Sciences, International Research Alliance for Sustainable Development (iRASD), vol. 7(2), pages :203-217, June.
    4. Naz Ata, Farah & Alam, Shaista & Saeed, Noman, 2019. "The Determinants of Income Distribution, an Empirical Analysis of Developing Countries," Public Finance Quarterly, Corvinus University of Budapest, vol. 64(4), pages 494-510.

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    More about this item

    Keywords

    Inequality; Development; Manufacturing Value Added; Investment; Time Series; Unit Root; Error Correction; Pakistan;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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