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Determinant of Inflation in Pakistan: An Econometric Analysis, Using Johansen Co Integration Approach

Author

Listed:
  • Ahmed, Farooq
  • Raza, Hasan
  • Hussain, Adnan
  • Lal, Irfan

Abstract

The main object behind the study is to explore the long run and short run dynamics of inflation in case of Pakistan. For this purpose study used annual data 1971 to 2012. Johansen co integration approach is used to check long run equilibrium while ECM (Error Correction Model) is used to check short run dynamics. The result highlighted GDP, M2, energy crises, import and current government expenditure, output gap and adaptive expectation create inflation while development expenditure negatively corrected with inflation. The study concluded that in Pakistan demand side and supply side inflation persist.

Suggested Citation

  • Ahmed, Farooq & Raza, Hasan & Hussain, Adnan & Lal, Irfan, 2014. "Determinant of Inflation in Pakistan: An Econometric Analysis, Using Johansen Co Integration Approach," MPRA Paper 106870, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:106870
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    File URL: https://mpra.ub.uni-muenchen.de/106870/1/MPRA_paper_106870.pdf
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    References listed on IDEAS

    as
    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    2. Hirotugu Akaike, 1987. "Factor analysis and AIC," Psychometrika, Springer;The Psychometric Society, vol. 52(3), pages 317-332, September.
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    More about this item

    Keywords

    Inflation; Long run and Short run;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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