Title

Political instability and inflation in Pakistan

Date of this Version

12-1-2011

Document Type

Journal Article

Publication Details

Citation only.

Khan, S. U., & Saqib, O. F. (2011). Political instability and inflation in Pakistan. Journal of Asian economics, 22(6), 540-549.

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2011 HERDC submission. FoR code: 149901

© Copyright Elsevier Inc., 2011. All rights reserved.

Abstract

This study investigates the effects of political instability on inflation in Pakistan. Applying the Generalized Method of Moments technique and using data from 1951 to 2007, we examine this link through two different models. The results of the ‘monetary’ model suggest that the effects of monetary determinants are rather marginal and that they depend upon the political environment of Pakistan. The ‘nonmonetary’ model's findings explicitly establish a positive association between political instability and inflation. This is further confirmed through analysis based on interactive dummies that reveal political instability significantly leading to high (above average) inflation.

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This document has been peer reviewed.