Factors Influencing Inflation and Economic Growth in Pakistan: An Econometric Analysis

Abstract

It is the need of the hour that in the wake of global dynamics, macro-economy of Pakistan is examined in detail. This may enable the policy makers to rethink and recast the growth and development objectives and strategy. Economic growth depends on a large number of social, economic, political, demographic, financial and global factors.Macroeconomics is based on General Equilibrium approach implying that the economy is influenced by the interplay of all conceivable factors. It is extremely Abstract | This paper made an econometric investigation of inflation and economic growth in Pakistan for the period 1990-2017. Money supply, imports, exchange rate and budget deficit were the major causes of inflation. Growth in GDP is expected to lead to a reduction in inflation. To combat inflation, unwarranted growth of money supply is checked and the exchange is stabilized. It is less likely that imports are reduced to lessen inflation due to economy needs. It appears difficult that GOP succeeds in curtailing the BD because of the widespread corruption and money-laundering. Human resource development coupled with investment and value-added by both agriculture and industry contributed significantly to economic growth. Should the policy makers attach genuine attention to these factors, it is expected that Pakistan economy will perform reasonably well. Specification and diagnostic tests revealed the appropriateness and soundness of the inflation and economic growth models. Parameters stability was examined for two periods (1991 and 2002). CPI showed stability in both periods but GDP did not demonstrate in the second period.

Rise of inflation and formation of interest rate on loans in industrial sector: A VECM approach to assess the impact on total industrial production from evidence of Bangladesh

“…Svigir and Milos [ 23 ] discovered a long-run negative association between inflation and financial growth that coexists with a short-run positive relationship. Kim and Lin [ 24 ] have investigated the factors that influence inflation and economic growth in Pakistan. According to their findings, inflation has a detrimental impact on economic growth in the short run.…”

Factors Influencing Pakistan Essential Oil Import

“…The main concentration of essential oil production lies in the northern regions of the country. The extraction process typically involves either steam distillation or cold pressing (Azra and Khan 2020). Small-scale farmers in Pakistan play a significant role in cultivating plants used for essential oil extraction, offering them a source of income.…”