Open AccessInflation in Pakistan
Author(s) -
Mohsin S. Khan,
Axel Schimmelpfennig
Publication year - 2022
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v45i2pp.185-202
Subject(s) - inflation (cosmology) , economics , money supply , monetary policy , broad money , monetary economics , real interest rate , private sector , interest rate , macroeconomics , physics , theoretical physics , economic growth
This paper examines the factors that explain and help forecastinflation in Pakistan. A simple inflation model is specified thatincludes standard monetary variables (money supply, credit to theprivate sector), an activity variable, the interest and the exchangerates, as well as the wheat support price as a supply-side factor. Themodel is estimated for the period January 1998 to June 2005 on a monthlybasis. The results indicate that monetary factors have played a dominantrole in recent inflation, affecting inflation with a lag of about oneyear. Private sector credit growth and broad money growth are also goodleading indicators of inflation which can be used to forecast futureinflation developments. JEL classification: E31, C22, C32 Keywords:Inflation, Pakistan, Leading Indicators, Forecasting, MonetaryPolicy