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Budget Deficit, Money Supply and Inflation: The Case of Pakistan

Tahir Mukhtar
Muhammad Zakaria

Sažetak

Conventional notions suggest that persistently high budget deficits give rise to inflation, which monetary policy on its own is powerless to prevent. However, empirical evidence does not provide convincing support for such a hypothesis. This paper reexamines the issue in the case of Pakistan using Johansen cointegration analysis. The empirical results suggest that in the long-run inflation is not related to budget deficit but only to supply of money, and supply of money has no causal connection with budget deficit. Hence, the findings imply that the hard government budget constraint does not find empirical support for Pakistan.

Ključne riječi

budget deficit; inflation; money supply; cointegration; Pakistan

Hrčak ID:

52667

URI

https://hrcak.srce.hr/52667

Datum izdavanja:

20.5.2010.

Podaci na drugim jezicima: hrvatski

Posjeta: 10.426 *