Title: The political economy of inflation in Pakistan

Authors: Muhammad Rashid Javed; Parvez Azim

Addresses: University of Pau and Pays de l'Adour, Avenue de l'Université, 64012 Pau, France ' Government College University, Allama Iqbal Road, 38000, Faisalabad, Pakistan

Abstract: The hypothesis to be tested in this paper is to explore whether there is any link between political economy and inflation in Pakistan. Inflation has always been a fiercely debated issue and is one of the main objectives of the macroeconomic policies both in developed and developing economies. Governments believe that persistently high inflation can have damaging economic and social consequences. Therefore, monetary and fiscal policies are formulated to combat inflation. This paper explores the major reasons behind inflation in Pakistan and looks at the interplay between economic policies, law, politics and inflation. To summarise, this paper aims to examine the link between political economy and inflation in Pakistan. This study has used the autoregressive distributed lag (ARDL) method to obtain the desired result. It is concluded that the SBP must be free from politics and government intervention in formulation and implementation of monetary policies to eliminate this menace.

Keywords: budget deficit; inflation; money supply; political economy; political instability; State Bank of Pakistan; SBP; Pakistan; economic policies; law; politics; ARDL; government intervention; monetary policy.

DOI: 10.1504/IJEBR.2016.080331

International Journal of Economics and Business Research, 2016 Vol.12 No.3, pp.204 - 215

Received: 09 Jun 2016
Accepted: 06 Aug 2016

Published online: 14 Nov 2016 *

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