Money, Inflation & Growth in Pakistan

The Pakistan Development Review 45 : 2 (Summer 2006) pp. 203212 Money, Inflation, and Growth in Pakistan ABDUL QAYYUM* This paper attempts to investigate the linkage amongst the nimiety coin supply growth and inflation in Pakistan and to test the hardiness of the monetarist stance that inflation is a monetary phenomenon. The results from the correlation outline indicate that there is a positive association between money growth and inflation. The money supply growth at first- orbitual affects accepted GDP growth and at the second round it affects inflation in Pakistan. The important finding from the analysis is that the excess money supply growth has been an important contributor to the skip in inflation in Pakistan during the study period, thus funding the monetarist proposition that inflation in Pakistan is a monetary phenomenon. This whitethorn be due to the loose monetary insurance policy adopted by the State Bank of Pakistan to show the high antecedency of the growth objective. The important policy implication is that inflation in Pakistan can be cured by a sufficiently tight monetary policy. The formulation of monetary policy moldiness consider development in the real and financial field and treat these sectors as constraints on the policy.

JEL classification: E31, C22, C32 Keywords: Money Supply, Inflation, Growth, amount of money Theory, Monetary Policy, Pakistan 1. INTRODUCTION Inflation obstinately affects the overall growth, the financial sector development and the vulnerable poor segment of the population. there is clear consensus that even moderate levels of inflation damage real growth [Cecchetti (2000)]. Inflation decreases the real income and also induces uncertainty. Considering such adverse impacts of inflation on the economy, there is a consensus among the worlds leading profound banks that the price stability is the prime objective of monetary policy [King (1999); Blejer, et al. (2000)] and the central banks are committed to the low inflation [Goodfriend (2000)]. consequently the... If you want to get a full essay, order it on our website: Orderessay

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