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The Monetarist versus the Neo-Keynesian Views on the Acceleration of Inflation: Some Evidence from South Asian Countries (with Special Emphasis on Pakistan)

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  • Akhtar Hossain

    (Newcastle University, Australia.)

Abstract

This paper tests the monetarist versus the neo-Keynesian views on the acceleration of inflation, using annual data for Bangladesh, India, Nepal, Pakistan, and Sri Lanka (mostly) for the period 1961—88, within the framework of the theoretical model of Stein (1978, 1982). The empirical results consistently support the monetarist view that changes in real money balances contribute to an acceleration of inflation. Another important finding is that except for Bangladesh, contrary to the neo-Keynesian view, bond-financed government expenditure does not have an independent significant effect on the acceleration of inflation.

Suggested Citation

  • Akhtar Hossain, 1990. "The Monetarist versus the Neo-Keynesian Views on the Acceleration of Inflation: Some Evidence from South Asian Countries (with Special Emphasis on Pakistan)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 29(1), pages 19-32.
    • Handle: RePEc:pid:journl:v:29:y:1990:i:1:p:19-32
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    References listed on IDEAS

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    1. Md. Akhtar Hossain, 1986. "Monetary Disequilibrium and Inflation. A Monetary Model of Inflation in Pakistan, 1963-82," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 25(2), pages 141-162.
    2. JONATHAN D. JONES & NASIR M. KHIUl, 1988. "Money Growth, Inflation, and Causality (EmpiricalEvidence for Pakistan, 1973-1985)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 27(1), pages 45-58.
    3. Stein, Jerome L., 1978. "Inflation, employment and stagflation," Journal of Monetary Economics, Elsevier, vol. 4(2), pages 193-228, April.
    4. Darrat, Ali F., 1985. "The monetarist versus the neo-Keynesian views on inflation : Some Italian evidence," Economics Letters, Elsevier, vol. 19(3), pages 237-241.
    5. Stein, Jerome L., 1978. "Inflation and stagflation," Journal of Banking & Finance, Elsevier, vol. 2(2), pages 109-131, August.
    6. Turnovsky, Stephen J & Wohar, Mark E, 1984. "Monetarism and the Aggregate Economy: Some Longer-Run Evidence," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 619-629, November.
    7. Stein, Jerome L, 1974. "Unemployment, Inflation, and Monetarism," American Economic Review, American Economic Association, vol. 64(6), pages 867-887, December.
    8. Stein, Jerome L, 1981. "Monetarist, Keynesian, and New Classical Economics," American Economic Review, American Economic Association, vol. 71(2), pages 139-144, May.
    9. Desai, Meghnad & Blake, David, 1982. "Monetarism and the US economy: A re-evaluation of Stein's model 1960-1973," Journal of Monetary Economics, Elsevier, vol. 10(1), pages 111-125, July.
    10. Karl Brunner, 1970. "The “monetarist revolution” in monetary theory," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 105(1), pages 1-30, September.
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    Cited by:

    1. Mohammad Aslam Chaudhary & Naved Ahmad, 1995. "Money Supply, Deficit, and Inflation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 945-956.
    2. Khan, Safdar Ullah & Saqib, Omar Farooq, 2011. "Political instability and inflation in Pakistan," Journal of Asian Economics, Elsevier, vol. 22(6), pages 540-549.
    3. Abdul Qayyum, 2006. "Money, Inflation, and Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(2), pages 203-212.
    4. Muhammad REHMAN*, 2010. "Money-Inflation Relationship: Band Spectrum Analysis Approach," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 20, pages 67-76.
    5. Inayat Ullah Mangla, 2011. "Reconstructing the Performance of Pakistan’s Political Economy: Another Paradigm," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 30-70, September.
    6. Saira Tufail & Sadia Batool, 2013. "An Analysis of the Relationship between Inflation and Gold Prices: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 18(2), pages 1-35, July-Dec.
    7. Iqbal, Nasir & Khan, Sardar Javaid Iqbal & Irfan, Muhammad, 2008. "Democracy, Autocracy and Macroeconomic Performance in Pakistan," MPRA Paper 28122, University Library of Munich, Germany.

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