IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/2243.html
   My bibliography  Save this paper

Significant Shift in Causal Relations of Money, Income, and Prices in Pakistan: The price Hikes in the Early 1970s

Author

Listed:
  • Husain, Fazal
  • Rashid, Abdul

Abstract

This study extends the analysis of casuality by Husain and Rashid by taking care of the shift in the variables due to the price hikes in the early 1970s. We investigate the casual relations between real money and real income, between nominal money and nominal income, and between nominal money and prices using using the annual data set from 1959-60 to 2003-04, examining the stochastic properties of the variables used in the analysis and taking care of the expected shifts in the series through dummies. The analysis indicates significant shifts in the variables during the sample period. In this context, the shift of the early 1970s seems to be more important to be incorporated in the analysis. The study finds an active role of money in the Pakistani economy, as it is found to be the leading variable in changing prices without any feed back. In the case of income, the study finds the feed back mechanism of money, which is generally missing in the earlier studies probably because of not taking care of the shift in the macroeconomic variables in Pakistan in the early 1970s.

Suggested Citation

  • Husain, Fazal & Rashid, Abdul, 2006. "Significant Shift in Causal Relations of Money, Income, and Prices in Pakistan: The price Hikes in the Early 1970s," MPRA Paper 2243, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:2243
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/2243/1/MPRA_paper_2243.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brillembourg, Arturo & Khan, Mohsin S, 1979. "The Relationship between Money, Income, and Prices: Has Money Mattered Historically? A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 358-365, August.
    2. Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
    3. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-552, September.
    4. James R. Barth & James T. Bennett, 1974. "The Role of Money in the Canadian Economy: An Empirical Test," Canadian Journal of Economics, Canadian Economics Association, vol. 7(2), pages 306-311, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fazal Husain & Abdul Rashid, 2002. "ECONOMIC LIBERALIZATION AND THE CAUSAL RELATIONS AMONG MONEY, INCOME, AND PRICES: The case of Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 18, pages 103-121.
    2. Fazal Husain & Kalbe Abbas, 2000. "Money, Income, Prices, and Causality in Pakistan. A Trivariate Analysis," PIDE-Working Papers 2000:178, Pakistan Institute of Development Economics.
    3. Abbas, Kalbe & Fazal, Husain, 2006. "Money, Income and Prices in Pakistan: A Bi-variat and Tri-varate Causility," MPRA Paper 4892, University Library of Munich, Germany.
    4. Fazal Hussain & Kalbe Abbas, 2000. "Money, Income, Prices and Causality in Pakistan: A Trivariate Analysis," PIDE Research Report 2000:2, Pakistan Institute of Development Economics.
    5. Bordo, Michael D., 1986. "Explorations in monetary history: A survey of the literature," Explorations in Economic History, Elsevier, vol. 23(4), pages 339-415, October.
    6. Shu-Ping Shi & Stan Hurn & Peter C. B. Phillips, 2016. "Causal Change Detection in Possibly Integrated Systems: Revisiting the Money-Income Relationship," Cowles Foundation Discussion Papers 2059, Cowles Foundation for Research in Economics, Yale University.
    7. Kalbe Abbas & Fazal Husain, 2006. "Money, Income and Prices in Pakistan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 7(1), pages 55-65, March.
    8. Rasool, Haroon & Adil, Masudul Hasan & Tarique, Md, 2018. "An Empirical Evidence of Dynamic Interaction among price level, interest rate, money supply and real income: The case of the Indian Economy," MPRA Paper 87452, University Library of Munich, Germany.
    9. Ansari, M. I. & Ahmed, S. M., 2007. "Does money matter? Evidence from vector error-correction for Mexico," Journal of Developing Areas, Tennessee State University, College of Business, vol. 41(1), pages 185-202, September.
    10. Richard K. Lyons, 1991. "Floating Exchange Rates in Peru, 1950-54," NBER Working Papers 3775, National Bureau of Economic Research, Inc.
    11. Panayiotis C. Afxentiou & Apostolos Serletis, 1991. "A Time-Series Analysis of the Relationship Between Government Expenditure and Gdp in Canada," Public Finance Review, , vol. 19(3), pages 316-333, July.
    12. Sarker, Rakhal, 1990. "Testing Causality in Economics: A Review," Department of Agricultural Economics and Business 258629, University of Guelph.
    13. Allan Fels & Tran Van Hoa, 1981. "Causal Relationships in Australian Wage Inflation and Minimum Award Rates," The Economic Record, The Economic Society of Australia, vol. 57(1), pages 23-34, March.
    14. Anthony Saunders & Richard B. Tress, 1981. "Inflation and Stock Market Returns:Some Australian Evidence," The Economic Record, The Economic Society of Australia, vol. 57(1), pages 58-66, March.
    15. Asma Awan & Hafiz Khalil Ahmad & Altaf Hussain & Muhammad Yousuf Khan Marri, 2021. "Prices, Money Supply and Output Nexus in Pakistan – A Macro Econometric Model," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 3(2), pages 38-77, September.
    16. Muhammad Hussain, 1991. "Money, Income, and Causality: Some Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 30(4), pages 907-918.
    17. KAMKOUM, Arnaud Cedric, 2023. "The Federal Reserve’s Response to the Global Financial Crisis and its Effects: An Interrupted Time-Series Analysis of the Impact of its Quantitative Easing Programs," Thesis Commons d7pvg, Center for Open Science.
    18. Zamani, Mehrzad, 2007. "Energy consumption and economic activities in Iran," Energy Economics, Elsevier, vol. 29(6), pages 1135-1140, November.
    19. Alberto Fuertes & Simón Sosvilla-Rivero, 2019. "“Forecasting emerging market currencies: Are inflation expectations useful?”," IREA Working Papers 201918, University of Barcelona, Research Institute of Applied Economics, revised Oct 2019.
    20. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.

    More about this item

    Keywords

    Money; Income; Prices; Price hikes; Casual relations; Pakistan;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:2243. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.