Political Instability and Inflation in Pakistan

This study investigates the effects of political instability on inflation in Pakistan. Applying the Generalized Method of Moments and using data from 1951-2007, we examine this link in two different models. The results of the 'monetary' model suggest that the effects of monetary determinan...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Khan, Safdar Ullah, Omar Farooq Saqib
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2009
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Summary:This study investigates the effects of political instability on inflation in Pakistan. Applying the Generalized Method of Moments and using data from 1951-2007, we examine this link in 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 measures of political instability and inflation. This is further confirmed on analyses based on interactive dummies that reveal political instability significantly leading to high (above average) inflation. Length: 24 pages