Citation:
[Journal:] Pakistan Journal of Commerce and Social Sciences (PJCSS) [ISSN:] 2309-8619 [Volume:] 8 [Issue:] 1 [Publisher:] Johar Education Society, Pakistan (JESPK) [Place:] Lahore [Year:] 2014 [Pages:] 170-184
Abstract:
This paper explores the short and long run dynamics of inflation in Pakistan using Johansen Co-integration Technique covering data from 1972-73 to 2012-13. Consumer Price Index (CPI), Exchange Rate (ER), Government Borrowing (GB), Non-Government Borrowing (NGB), Real GNP (RGNP), Indirect Taxes (IT), Growth Rate of Money Supply (GMS), Import Price Index (IPI), Real Demand relative to Real Supply (RD/RS) and Wheat Support Price (WSP) Money Supply (MS) are taken as indicators. The result shows a long run relationship among the selected variables. It is found that the ER is the most significant factor of inflation in 2011-12, GB, IT, GMS, IPI, RD/RS. It represents the output gap consist of fiscal policy inflation is highly significant.