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Relationship between Inflation and other Macro Economic Variables in Pakistan

Journal of Management Info

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Title Relationship between Inflation and other Macro Economic Variables in Pakistan
 
Creator Ali, Adnan; PhD Student IM Sciences
Jan, Farzand Ali; Professor Comsats University of Technology
Khan, Sami Ullah; Institute of Business and Management Sciences
The University of Agriculture, Peshawar
 
Subject Budget Deficit; Inflation; Money Supply; Autoregressive Distributed Lag;
 
Description Conventionally, it is claimed that persistently higher deficit in government budget may cause the inflation to rise in the long run but this relationship is not conclusive empirically. Therefore, the present study is aimed to determine the relationship between inflation and other studied variables of macroeconomic i.e. fiscal deficit and supply of money in the short run as well as in the long run in Pakistan. the bound testing approach to co-integration and VAR model, established within an autoregressive distributed lag (ARDL) is used to annual data of time series covering the period of time from 1960 to 2010 for examining the studied variables both in short run as well as in long run. The conclusion of the study shows that the relationship between the studied variables is insignificant in the long-run but the outcomes of VAR model illustrate that a short run positive relationship between the studied variables cannot be ignored. The study further indicates that 1% change in budget deficit and money supply caused to change the inflation by 0.29 and 0.31 times respectively in the short run. The results provide strong evidence that the government may target reducing the inflation by generating domestic economic resources to boost the economic growth instead of reducing budget deficit.
 
Publisher Readers insight Publisher
 
Contributor —
 
Date 2015-12-01
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
—
 
Format application/text-plain:formatted
 
Identifier http://jmi.readersinsight.net/index.php/jmi/article/view/44
 
Source Journal Of Management Info; Vol 8, No 1 (2015): Volume 8, Issue 1; 15-49
2313-3376
 
Language eng
 
Relation http://jmi.readersinsight.net/index.php/jmi/article/view/44/_8
 
Rights Copyright (c) 2015 Journal Of Management Info
http://creativecommons.org/licenses/by/4.0