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Impact of Inflation on Economic

Growth Pakistan

A PROJECT
Submitted in Partial Fulfillment of
The Requirement for the Awarded
Degree Of EMBA (HRM )

UNDER THE SUPERVISION OF

Mr.Farhan Khan

SUBMITTED
BY
Kashif Khan

Reg No: 2352-315005

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ACKNOWLEDGEMENT

A Good start leads to a Fine end. The ideal way to begin documenting this project work would be to
extend my earnest gratitude to everyone who has encouraged, motivated and guided me to make a fine
effort for successful completion of this project.

I would like to pay thanks of my honorable teacher MR.Farhan Khan Of Preston University

. This proved to be a very good learning experience for me, where I could get an exposure to all the
aspects of real time Core HR activities.
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TABLE OF CONTENTS

Abstract. 4

SECTION

1. Introduction. 5-14
2. Literature Review . 15-30
2.1 empirical review.31
3. Hypothesis.. 31
4. Variables..31
5. Model and frame work 31
6. Methodology.. 32-33
6.1 Model specification and estimation technique.. 34-35
7. Results and discussions.. 36
7.1 Data and summary output..... 37-39
8. Conclusions ... .40-41
9. Policy Implication ... .42

TABLES
REFERENCES . 43-45

APPENDIX. 46-50
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ABSTRACT

The Project is to discover out the force of meeting blow of inflation on of money and goods growth in

Pakistan by using the facts from 1950 to 2012. This project uses the regression having an effect equal to

the input design to be copied to discover out the force of meeting blow on level at which a country

produces value growth. This work-place is base on manor Husain whos discovering are small and also

like to Singh (2003) which recommends that the going higher prices within 4 to 6% is good for Pakistan

and in the middle of bank should keep the policies giving approval for the growth. As my discovering

are small that there is no force of meeting blow of inflation on of money and goods growth.
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With a view to building a distinct brand identity and to give the most appropriate programs to different

market segments, the entire education and services offerings from Deccansoft are divided into the

following categories:

What level of inflation is harmful to growth?

Theory:

Money-related make observations theories results based on about the outputs of money and

goods increase to going higher price. These of money and goods theories are very useful

because the idea of these theories based on made observations starting idea. noted in history in

the lost word that is of limited stretch of time as going on all the time coming back again to the
 Page 7 of 48

going higher prices the early makes observations about the going higher price and of money and

goods increase were made on cyclical outcomes, as going on all the time coming back again to

the going higher prices is looked upon as a post earth war 2 reasoning. In move forward of then,

going higher price rounds were moved after by turn of prices become lower.

Going higher price act like a not hard-working dog that is not doing anything like upward level

and down level general direction. The going higher price level doing nothing but it is hard to

move in a not covered by general rule level unless and until there is any perturbation. from that

point on, the going higher price moves to another level at which going higher price comes to a

decision about. Theory, thus being looked for account a positive connection position between

going higher price and of money and goods increase. The aggregative supply and aggregative

thing needed design to be copied also tells that positive behavior of going higher price and of

money and goods increase, where the going higher price effects on of money and goods increase

and of money and goods increase are increased. Even so, in the 1970s the idea of stagflation go

higher round mass, outgrowth and the Credibility , of the positive connection was questioned. At

that time Phillips Curve relation appeared and widely taken. In this reason the rate of going

higher price very high level and also the Phillips Curve relation is a clue of low and not output of

money and goods increase. In this printed material the coming after sub-sections we use up some

time great caused from within increase value possible states, Neo-Classical, Monetarist, Neo-

Keynesian and Keynesian, every part playing an important part to the of money and goods

increase and going higher price relation. great science to do with the producing, distribution, and

using up of goods and work supply have memory of supply side possible states if the nations

interests, money, goods is to grow the supply side theories under-line the need for rewards to

keep from destruction and give, joined to the land money and tiredness. Under the Ad-AS
 Page 8 of 48

framework the Neo-Keynesian and Keynesian theory give some important and bit by bit

framework for connecting going higher price and of money and goods increase. Monetarism give

an account of the amount possible states, and playing in important part of money increase in

being representative going higher price, Endogen& Neo-Classical increasing step theories looked

for the effects of going higher price on of money and goods increase through its behavior on by

death group and investment.

This operation of making observations is present the important and useful point or amount unlike

among the answers of theoretical makes observations about; in the different countries the ration

of going higher price on of money and goods increase is different. Even so, some theoretical

results was quite greatly sized which play or amusement some results about the edge rate of

going higher price according different countries. For example in India Mr. Singh play or

amusement some important results on board forming floor of doorway level of going higher

price and Mr. Mubarik make clear to useful outcome about board forming floor of doorway level

of going higher price in Pakistan and he also said the board forming floor of doorway level of

going higher price is 9 parts of a hundred in Pakistan. Some other makes observations about

board forming floor of doorway level of going higher price for both types of countries like

growing and undergone growth. Even so, Senhadjis and ruler from middle Asia works on board

forming floor of doorway level of going higher price for both types of countries like growing and

undergone growth. They said board forming floor of doorway level range 7-11 parts of a hundred

for the growing countries including Pakistan.

Jing Xiao get that con-integration framework keeping in a small space connection matrix and

Granger wounded, ill person test say to the place, position of relation between going higher price
 Page 9 of 48

and of money and goods increase. The going higher price results make clear to greater than zero

on of money and goods increase relation in the long word period. Rising prices is importantly

connected putting to use the of money and goods increase rate. The simple regressions flat

square bit gives a sign of or described the relation between three able to be changed going higher

price unevenness of money and goods increase and going higher price. Now it is possible with

the help of increase value accounting design to be copied to place that main (makes) deep,

hollow lines through which going higher price comes down of money and goods increase.

(Fischer).

According to (lee and Wong) that going higher price board forming floor of doorway takes place

in the connection between money business Development and increase value. Now we can say

that some changing in the going higher price directly effect on the connection between 2 able to

be changed money business development and increase value. as an outcome of that,

geomorphologic make good in going higher price board forming floor of doorway level should

be taken when building and statement of what will take place in the future models of money and

goods Increase. After the independence the rate of economic growth of Pakistan is higher than

the South Asian economic growth rate. But with the passage of time economic growth of

Pakistan was affected by various issues including political instability, burden of foreign debt,

poor exports and high imports, lack of implementation of the economic policies for many years

(Khalid, 2005).

Two wars with India first in 1965 on and second war in 1971 on Bangladesh independence

brought Pakistan economy at recession stage. Therefore, 1970s, the economy saw the break-up

of the country after a civil war, the nationalization of industries, high inflation, finance and
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education, flooding, a sharp hike in petroleum prices and recession in world market. The stifling

of private initiative and entrepreneurship and the control over all key decision variables by the

Government were a major setback to the economy causing huge uncertainty and loss of investor

confidence.

The economy recovered in 1980s by adopting deregulation policy by the government and policy

makers. Economic growth decelerated again in the 1990s with average trend GDP growth of

4.4percent per year and stagnant TFP. Political instability, frequent changes in government, weak

governance, poor macroeconomic management and unfavorable external environment were more

dominant than the favorable impact of economic policies of deregulation, liberalization and

privatization introduced in 1991. These reforms and policies were pursued haltingly and

sporadically.

The recent growth acceleration has also been accompanied by a similar increase in the

investment ratio from 15.5 percent of GDP in 2001-02 to 20 percent in 2005-06. The recent

growth acceleration has come largely from an increase in TFP. The contribution of TFP to growth

in the last few years is similar or even somewhat higher than in the earlier growth periods.

Pakistan for the stage in time 1973-2005 gives a detailed account of the board forming floor of

doorway level of going higher price in Pakistan. In the end of these take views of the write gets

that there is no any board forming floor of doorway level of going higher price in Pakistan.

Mubarak (2005) is the main person (person in control) to discover 9 parts of a hundred of going

higher price board forming floor of doorway level in Pakistan and all other answers. This work-

place also shows that there is 5 parts of a hundred contemporaneous going higher price is
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discovered in Pakistan that is a positive coming together with force on of money and goods

increase. Further work-place shows that the blows of contemporaneous going higher price on of

money and goods increase is good but also play or amusement some insignificants. After have a

discussion all the requirements and fundament of the discovery by reasoning get (grain) cut

from the take views of we easily say that the say yes (to offer) range of the going higher price in

Pakistan 4-6% this been ringing of going higher price is able to help for support of money and

goods increase. Like idea described in India by Singh in 2003 that the Target going higher price

range is 4-7% right in India for of money and goods increase.

In Pakistan the going higher price is the thing talked of supply and demand shocks. In Pakistan

Central Bank of Pakistan should keep the going higher price in been ringing (S.Senhadji and

Khan A, 2000).

LITRATURE REVIEW & EMPIRICAL REVIEW

I According to jing xiao in harmony with to Jing xiao the relation between of money and goods

increases and going higher prices of China. Earlier written works cannot get any clear, certain

answer on these questions. This make observations go to person in authority will error putting

right and use con-integration models joining Granger idea that every effect has a cause test and
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connection matrix go into with care the of money and goods growth and going higher prices

relation. This news given is every year time number, order, group, line from 1978 to 2007 of

China. The long run going higher prices answers make clear to greater than zero have a relation

with to money-related increase relation. When China (makes) gets greater, stronger, more

complete interests, money, goods they must make payment to attention to price level. The cause

of going higher prices in the short run stage in time would be high rate of motion increase of

monies put into business (Jing Xiao , 2007).In harmony with to every year news given of money

and goods increase and going higher price changing one way and then the other we see the

results on both growing and made up to day countries. The knowledge of 1961-2009 stage in

time covers 31 made up to day countries and 182 growing countries. We get the supporters

answer by five year coefficient of different in some way of going higher prices In growing

countries we suggest according to important facts supporting that going higher price changing

one way and then the other has make clear to a less than zero copies of book made at one time on

of money and goods increase when the rate of going higher price overtakes 10 parts of a

hundred. In made up to day countries the increase of going higher price is under control there is

no any facts supporting to increase going higher price(Raghbendra Jha and Tu Dang , 2009).

Identified the nexus between interest rate and investment of the Pakistan for the span from

(1964-2012). The study explored that investment was one of the main determinant of GDP that

play an important role in boosting up the economy. Interest rate and investment were directly

attached to each other, fluctuation in the rate of lending (interest rate) changes investment and

saving pattern in the economy of Pakistan. Muhammad et al. (2013)

Found that high exchange rate is positively associated with growth rate. But in Pakistan imports

balance is greater than exports balance due to the lack of advancement in exports goods. This
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difference between balance of payments and trade balance economy remains negative and results

low growth rate. Ahmad (2013)

Investigated both the short run and long run relation of monetary policy, rate of inflation and

growth rate in Pakistan during the period of 1972-2010. The investigation showed that credit

disbursement to private sector leads to increase in the level of inflation that is harmful for the

economy. When supply of money increases in the local market which not only increases the

purchasing power of the people but also raises the demand for the goods and services against

supply of goods and services. Chaudhary et al (2012)

Analyzed a negative impact of the inflation on Brazilian economy under both short run and long

run scenario. The study found permanent inflationary shocks on the economy while such shocks

of inflation didnt threatened the economy in extreme. However permanent increase in inflation

rate would be trouble for the health of Brazilian. (Faria and Carneiro 2001)
This make observations paper described the relation between going higher price and of money

and goods increase makes more fixed the belief that the left out not fixed in level lines on an

angle of received talks between persons models can be by money and goods important and

statistically. This important observations shows the outcome according to idea, not fact of

Hansens (1999) talks between persons box quality of putting up with the opinions of others

simulation that the relation between going higher price and of money and goods increase for

growing countries. Doorstep ideas and Regression onto floor both are had a discussion about and

these readily ready (to be used) for repressors the possible bad starting opinion of keeping out

(away from) and authorities intercepts.(Alexander Bick, 1999).

Analyzed a negative impact of the inflation on Brazilian economy under both short run and long

run scenario. The study found permanent inflationary shocks on the economy while such shocks

of inflation didnt threatened the economy in extreme. However permanent increase in inflation

rate would be trouble for the health of Brazilian. (Faria and Carneiro 2001)
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Analyzed the causes and effects of exchange rate and inflation rate volatility on overall output of

developing countries. They stated that if the currency exchange rate of developing country

pegged over the currency exchange rate of developed countries the level of inflation can be

control in developing countries. They also concluded that adoption of floating exchange rate by

the developing economies had a very expensive cost near about 10 percent per year which is

greater than typically developed economies. (Bleaney and Fielding 1999)

In This reasrch to every year news given from 1973 to 2000 we have a discussion the level of

going higher prices in West Pakistan (La ruler from middle Asia and senhadji 2001). After have a

discussion all the conditions and requirements of board forming floor of doorway design to be

copied and finally its predisposition results using knowledge of going higher prices and of

money and goods increase of home country and after work-place we get supporters Major points.

We can make statement of the sense of words idea that every effect has a cause directions from

going higher prices to of money and goods increase and not other way around after idea that

every effect has a cause test. The red ready of money and goods increase is getting lifted up,

higher prices and board forming floor of doorway design to be copied get at the details of 9 parts

of a hundred suggests board forming floor of doorway going higher prices level for of money

and goods increase. The powerful answers, get form gives a sign of certain, errorless level of

board forming floor of doorway going higher prices and having force in law of the design to be

copied, this deeply make observations work-place gives a sign of that the main reason of money

and goods increase is going higher prices level below 9 parts of a hundred. These results might

be making ready best results in working out a most good selection going higher price Target. All

the same, these results do not give an idea of that of money and goods increase is low the level of

going higher prices(Yasir Ali Mubarik , 2005).

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In this survey document writer defines Turkey analyze in our country the relationship between

economic increase and rising price in the periods of 1987 and 2006. In both periods turkey

analyze with the help of Bound Test developed Pasaran et al. (2001) these test show the results of

long term relationship between these two components economic increase and rising price and

coming after the test result relationship between two rows of the macrocosm of co-integration

collaboration. There is no any result found about numerical significant long term relationship

with formed ARDL models and there is also short term numerical significant relationship and

negative results found. Causality test represent the causality relationship between two rows.

According to Causality test there is no causality relationship found between economic increases

to rising price if causality relationship found it has been raising price to economic increase(

Erman Erbaykal and H. Aydn Okuya, 2006).

This survey tries to explain according to quarterly time-series information for the periods 1981 to

2004 that rising prices optimal levels perform the main role for economic increase in Lesotho,

we can easily converted all annual information to quarterly time-series information by using

Three dimensional interpolation technique engrafted in Eviews econometric software . These

quarterly time series information show 10 percent optimum amount of rising price based on

rising price is detrimental for economic increase. According to this result any rising price rate

above this optimum level become a reason of economic increase.( Monahan Seleteng, 2004).

In this document writer tries to explain the primary thing is that to using annual information of

Pakistan for the period 1973-2005 gives a detailed account of the board forming floor of

doorway level of going higher price in Pakistan. In the end of these take views of the write gets

that there is no any board forming floor of doorway level of going higher price in Pakistan.

Mubarik (2005) is the main person (person in control) to discover 9 parts of a hundred of going
 Page 16 of 48

higher price board forming floor of doorway level in Pakistan and all other answers. This work-

place also shows that there is 5 parts of a hundred contemporaneous going higher price is

discovered in Pakistan that is a positive coming together with force on of money and goods

increase. Further work-place shows that the blows of contemporaneous going higher price on of

money and goods increase is good but also play or amusement some insignificants. After have a

discussion all the requirements and fundament of the discovery by reasoning get (grain) cut

from the take views of we easily say that the say yes (to offer) range of the going higher price in

Pakistan 4-6% this been ringing of going higher price is able to help for support of money and

goods increase. like idea described in India by Singh in 2003 that the Target going higher price

range is 4-7% right in India for of money and goods increase.

In Pakistan the going higher price is the thing talked of supply and demand shocks. In Pakistan

Central Bank of Pakistan should keep the going higher price in been ringing (Manzoor

Hussain2005).

In this survey writer described a question is super-neutrality of money. A currently theoretical

solution presents threshold model alternates of super-neutrality.the theoretical solution show that

the threshold level of rising price more than the effect of rising price on long term increase

changes. We use new economic methods to obtain the solution and some other results in non-

dynamic, panel-information model and fixed-effects that have threshold effects. The solution

describes that rising price has a nonlinear effects on economic increase. Our solution and

theoretical work in which describes that rising price effects on economic increase. The

coefficient sign on investment is difference between the industrialized and non-industrialized

subsamples, and the coefficient on openness has a positive sign are provide interesting solutions.
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In the future research our aim we applying threshold techniques will causes the estimate co-

efficient on openness to agree with standard hypothesis.( David Drukker ,1998).

In this important research document, the authors using annual information t o describes the

relationship both long term and short term dynamics of the rising price and economic increase of

four South Asian Countries. In this document the authors used error correction and co-integration

models to explain the long term and short term relationship of economic increase and rising

price. In this research the main objective of the document is to analyze the relation between

economic increase and rising price if there is any relation between these two variables, its by

nature and no other reason for this relation exit. After study all important and useful requirements

authors are found two main results about economic increase and rising price, 1. The relationship

between rising price and economic increase are positively related.

The Changing in growth rates after changing in inflation is bigger than that increase to changes

in rising price rates. These results describe some important points and these points have

important policy implications. The helpful advice to reduce economic growth our main and very

important step is attempts to reduce rising price to a very low level. Even so, we can easily

attempts to achieve faster economic growth may be the inflation rate are becomes unstable. Thus,

these points and ups and downs are on a knife-edge.in this document the main challenge for the

authors is to search a growth rate level which is stable rising price rate continuously if authors

cant find the level of economic growth than first beat inflation then control the faster economic

growth rate levels. The basic thing of economic increase is rising price and as per ruled by

Bruno and Easterly (1998) this is very tough condition that the economic growth rate may speed

the rising price rate and take it down. ( Girijasankar Malik and Anis Chowdhury2001).
 Page 18 of 48

This research paper explores the present condition between rising price and economic increase in

Bangladesh. Some basic assessment has been adopting throughout the error correlation and co-

integration models. Further more in this paper explain the economys threshold level of rising

price and explores an interesting policy issue about economys threshold level of rising price.

The deep study clues pointing that there is a negative long term statistical importance

relationship for a country between rising price value and economic increase and also indicates

negative along term relationship statistically importance between user Price list of words in a

book and true Gross kept by man product. writers have said-about in this paper about place,

position of going higher price value and of money and goods increase in Bangladesh in late

1990s and they said Bangladesh was already on the turning point (from positive to less than

zero) of going higher price value and of money and goods increase relation. Writers also make

statement of the sense of words the level of board forming floor of doorway if going higher price

increases this level than act on of money and goods increase and the recommended 6 parts of a

hundred board forming floor of doorway level of going higher price. These answers play or

amusement some important general road-map that puts to use on both development cooperators

and house servant agreement makers. The first thing about these general road-map that that going

higher price rate is not listed in the regular payments (not by hours, bit) and payments. The going

higher price will effect on giving money for force and a get well price of living. Second thing is

that country as an unbroken stretch act tasks to balance the credit requirements by the private and

public parts against both balance of payments forces to do and inflationary. According to through

making, becoming smaller money-related agreement 11 it is not always possible to money-

related authority to make greatest degree the nominated interest rate above the was looking on as

to come going higher price rate. That is way the money-related authority is work to get changed
 Page 19 of 48

to other form going higher price using that possibly taking place in addition methods and

procedures. Some points are in order.

For Example in this surrounding words, sense of Bangladesh, the answer on condition that in

this printed materials do not house the supporters important question under discussion.

1. It is not possible to say that how the of money and goods increase rate will make clear to the results
and the rate of going higher price gets up. But the going higher price remains within the edge level

2. The greater going higher price uncertainty cause is higher going higher price and what is the relation
between going higher price uncertainty and going higher price.

3. if going higher price directly or in a roundabout way has to do with in of money and goods increase.

4. What is the main purpose of high inflationary force?

(Shamim Ahmed and Md. Golam Mortaza 2005).

According to Gokal and Subrina the main purpose of the printed material was to give an account of the

basic and important relation between going higher price and of money and goods increase. in harmony

with to deeply work-place about going higher price and of money and goods increase and thinks, the

measures-taking play or amusement some useful and very important perceptiveness act rightly of going

higher price& of money and goods increase like size. In Michael go to person in authority he discovered

after 8 parts of a hundred to do with structure break going higher price badly acted-on on increase value.

ruler from middle Asia& sendadi discovered that board forming floor of doorway going higher price

level for undergoing growth countries are 11-12 parts of a hundred and for to do with industry countries

at 1-3 parts of a hundred. These results playing important part to fix the main help of support going

higher price hard to move and supply an useful getting-into into the relation between parts. looking

specially going higher price operation between the able to be changed is not surprising under the
 Page 20 of 48

weighty tax connection, given the power over going higher price current of current interest good part

building of the of money and goods system and causes producing an effect. Less than zero not strong

connection shows only connection co-efficient and do medical operation from of money and goods

increase to going higher price shows causality. According to some other overviews to importance of

support low going higher price give some important points for Fiji general road-map designers in order

to be a mother to higher money-related increase. (Vikesh Gokal and Subrina Hanif , 2004)

According to Huybens and smith, Gylfason and Herbertsson and Bose rising price will effect on

financial market through real economic activities. Same results are produce for American

countries by Gregorior and Guidotti. When American countries faced in 1970s and 1980s high

rising price rate, financial development retarded economic increase. The main purpose of this

study investigates the relationship of three variables for Japan & Taiwan and these three

variables are raising price, financial development and economic increase. Toward investigate the

relationship of these three variables, to investigate the effects of possible rising price on remain

two variables relationship between financial development and economic increase; we employed

the TAR approach reduced by Tong & Hansen. After investigate we find that there is one rising

price threshold value condition in Taiwan and two rising price threshold value conditions in

Japan.

The estimation results of processing on annual increase rate of rising price and exploring the

effects of financial development on economic increase under unlike rising price routines that

when the rising price level of threshold below 7.25percent and higher than 7.25 percent than the

financial development may upgrade economic increase for Taiwan and financial development

will not produce any effect on economic increase respectively. Accordingly financial
 Page 21 of 48

development upgrades economic increase under low level rising price. In Japan the deeply study

results show that when the level of rising price of threshold is below 9.66 percent than financial

development show some useful effect on economic increase. However, when the rising price

above threshold level financial development is prejudicious to economic increase. In the end of

this document the conclusion that Japans rate of rising price is low or temperate when the

financial development will promote economic increase can be established and we find this result

with the help of Huybens and Smith, Bose, and Rousseau and Wachtel. In Taiwan and Japan the

guessed result obtain in this study that rising price threshold occurs in the connection between

financial Development and increment. Now we can say that some changing in the rising price

directly effect on the connection between two variables financial development and increment.

Consequently, geomorphologic upgrade in rising price threshold level should be taken when

constructing and prediction models of economic increase for Taiwan and Japan.

( Chien-Chiang Lee and Swee Yoong Wong,2010).

Minli

Now a days economists believe that high rates of rising prices is a cause of many problems

not just for on problem it is a reason of many problems. But for mass economic interpretation.

Even so, very low range of agreements available about the prices relationship between rising

price & economic increase behavior and environment by which rising price effect on economic

increase,

The first portion of the document by the help of increase expenditure formula & the increase

accounting formula explain the effects of the rising price on economic increase performance in

both type of growing and developed countries, the solution supported the nonlinear relationship
 Page 22 of 48

between rising price and economic increase. In further both types of countries growing and

developing countries show different types of reactions of nonlinearity between the rising price

and economic increase relation.

In the growing countries, the information about rising prices and economic increase shows that

two threshold available in the function relating rising price and economic increase. The first level

of threshold was showed 14 percent, & second level of threshold was showed 38 percent. In the

first threshold level the rate of rising price is low similarly the effects of rising prices on

economic increase are positive and acceptable level. In The level two rising price rates for

Moderate which are between the two threshold levels the effects of rising price on economic

Increase is negative and rate of rising price is very high. at exceedingly high rising price rate, the

borderline shock of part rising prices on economic increase lessens speedily but is still

Importantly negatively charged.

In the developed countries, there is one threshold is discovered and the it is very important, the

level of threshold is stronger to estimation suggests and model stipulations and this important

threshold level is discovered at 24 percent, Both types of levels of threshold works are same in

growing countries and developed countries that is way the rate of rising price is below the level

of threshold 24 percent. The main reason of negative economic increase is raising price while the

importance of this negative effects on rising price exceeds this level of threshold.

In this document define 2 levels of thresholds for both types of countries growing and developed,

the effects of both level on these countries are follows: in the first level of threshold defines

(what rising prices blocks increment, but subwoofer which ever rising prices has no pregnant or

even positive results on increase), whereas in the second level of threshold (in this level defines
 Page 23 of 48

the large amount of drop in the marginal effects of rising price occur). Further in this document

explain nonlinearity effects on both types of countries (growing and developed), and growing

and developed countries have a different type of nonlinearity in the rising price and economic

increase relation.

For growing countries these researches show some useful and well define policy implication.

First define the range of marginal negative effects on moderate rising price and the range is 14 to

38 percent is mentioned. We can reduce economic increase by about 0.2-0.4 percent points if

increase in rising price by 10 percent point per year will effect on economic increase rate. This

advice effect on long term moderate rising price on increase will lead to a substantial negative

effect on economys performance.

Second important thing in this document for policymakers will not keep the rising price level at 0

percent since the first level of threshold of 14 percent does not impede & even stable economic

performance. Third main thing in this document hyperinflation and it is not have any hyper-

inflation effects of economic increase because moderate rising price is grater that marginal

impact of hyperinflations similarly we can say that decrease in the hyperinflation rate have not

any important effects on economic increase. Therefore the main goal of policymakers in growing

countries is controlling moderate rising price.

India has managed its economic stability at the most appropriate way. There are only two

incidents which show the economic stability but they have managed their demands and supply

very effectively. Indian monitory and fiscal policy helps the country in managing its financial

increase and stability through the year and helps in its people growth. Since the developed

countries express a different design of nonlinearity in the rising price- economic increase
 Page 24 of 48

enterprise : the magnitude of the bad impression of rising prices on increment diminutions as the

rising price rate multiplies, and even the low degree rising prices rate has a potent disconfirming

effect on economic increase, policymakers in developed countries, unlike those in evolving

Lands, should exercise attempts to keep the rising price rate at zero percent seeing as a little bit

of addition in rising prices will cause a important simplification in economic increase. This

determination, to some extent, subscribes the inflation-targeting pecuniary policy espoused by

New Zealand, Canada, the United Kingdom, and other countries.

The second portion of this document is very important and in this season attempted to find the

way which rising price affects on economic increase in a nonlinear method for long term period.

There is two main tools (linear model and the model with threshold effects) are used for

examined the efficiency of investment and the level of investment. The useful thing is (TFP

increase) for both types of countries growing and developed, but not the investment level

(Investment /GROSS DOMESTIC PRODUCT), the channel which nonlinearly affects economic

growth and rising price adversely is hypothesized by existing theoretical models.

Further more for growing countries the level of moderate rising price is below 65 percent and for

developed countries the level of moderate rising price is below 42 percent, rising price show the

significant effects on investment level. Most current studies explain between rising price and

long term economic increase role of the level of investment (capital accumulation). Thus,

according to papers contribution we can say that the TFP increase is a important channel

actually TFP is only channel through which rising price affects economic increase in nonlinear

method for long term period. (Minli, 2005).

 Page 25 of 48

This research motivated by the current developments on the relationship between rising price and

economic increase and also proved some useful and important tips for developed and growing

economies. In this document, tally the long term and short term dynamics relationship of rising

price and economic increase by using error correction model and co-integration model. In India

we can tell that using annual information that the important objective to search that if there is any

relationship in rising price and economic increase available than its any reason or its nature. The

exiting result found about this situation is that first is rising price and economic increase is

negatively related and the second thing is increase to changes in rising prices rates is smaller than

rising prices to changes in increase rates. These solutions have main policy implications.

In this research the rising price and economic increase nexus has been systematically analyze in

India. The important result is that from the previous period if any increase in rising price

negatively effect on economic increase. The most desired policy is there is always a constantly

down press on rising price without any information about what is the threshold level. Moreover

policymaker notes that negative effect on economic increase by the any increase in rising price

from the last nay period at any level. The main reason is decision maker and common peoples do

not like rising price has enormous behave on the consumption method.

In India rising price has commonly under control. Various fiscal monetary and administrative

measures playing an important role in India to control a rising price there is two period of rising

price since 1980 but administrative measures and various fiscal monetary controlled rising price

efficiency. Also the results of investment behavior in private manufacturing tell that an increase

in level of rising price rate is negative behavior on private investment in manufacturing.

India has managed its economic stability at the most appropriate way. There are only two
 Page 26 of 48

incidents which show the economic stability but they have managed their demands and supply

very effectively. Indian monitory and fiscal policy helps the country in managing its financial

growth and stability through the year and helps in its people growth. (Prasanna v Salian1,

Gopakumar ,1999).

Rising prices is importantly correlated utilizing the economic increase rate. The simple

regressions panel indicates or described the relationship between three variables rising price

unevenness economic increase and rising price. Now it is possible with the help of increment

accounting model to spot that main grooves through which rising price comes down economic

increase. In this research document the author described with help of past research papers and

studies that results of the document inculpated that rising price effected on economic increase by

cutting the rate of productivity increase and trimming down investing. We also see in exceptional

cases that in long term period the low rising price and small deficits were not important for high

increment, high rising prices was not consistent with survived increment.( Stanley Fischer,

1993).
 Page 27 of 48

HYPOTHESIS:

Translation:

If there is force of meeting blow of CPI on level at which a country produces value growth.

There is no force of meeting blow of CPI on level at which a country produces value growth.

There is no force of meeting blow of hanging from wall CPI on level at which a country

produces value growth.

VARIABLES:

DEPENDENT: GDP Growth

INDEPENDENT: CPI, FDI

Research is base on quantitative bases and the data collection is on secondary basis from

published data of state bank of Pakistan and some business news papers including economic

survey of Pakistan reports.

 Page 28 of 48

MODEL AND FRAME WORK

CPI

GDP GROWTH
FDI

METHODOLOGY:

Most of the knowledge we keep (self, thoughts) in order, under control on this control used

greatly sized number of countries going to person in authority with control flat square bit

knowledge and crossbreed sectioned news given. For example Senhadji, ruler from middle Asia

and Burdekin put round (in folds) many countries used crossbreed sectioned news given in the

diagnostic . If person countries have a going higher prices increase value relation persons making

observations chose crossbreed sectioned knowledge because one only country generally exists

without the range of going higher price experience necessary to make certain. Yet in the direction

of the east and Bruno described when knowledge from countries with 40 parts of a hundred or

more than 40 parts of a hundred going higher price are kept out (away from) from the diagnostic

than any crossbreed sectioned relation between of money and goods increase and going higher

price does not keep importance. In the like form (of dress), Barro and Fischer used control flat

square bit knowledge to take into mindful the time size of going higher price and of money and

goods increase. There are very few makes observations or overviews In one countries Mubarik

operation of making observations and give a song make observations both used in their make
 Page 29 of 48

observations time number, order, group, line facts to work out the rate of board forming floor of

doorway going higher prices. While in this make observations reports knowledge for computers

about user PRICE list of words in a book, & Gross kept by man product takes from the State

Bank of Pakistan and Economic agreement Department libraries or place for storing machines.

Two types of facts news given is used to value the apparatus through going higher prices makes

damaged, feeble long word of money and goods increase and to question the relation between

going higher price and of money and goods increase. In the stage in time 1951 to 2010 the based

on experience framework account have used yearly knowledge of Gross kept by man product

and user Price list of words in a book discovered from the Pakistan Bureau Of statistics , in the

first phase in this based on experience formwork for example the connection between going

higher price and of money and goods increase, firewood of in existence user Price list of words

in a book ( CPIt * ) & ( CPIt-1) have been used. in addition, of money and goods increase rates

are worked out from the amount gone away from straight of firewood of Cross Price list of

words in a book and from firewood rates of going higher prices.

 Page 30 of 48

Model Specification and Estimation Technique

We used the following linear regression equation formula: The main purpose of the simple linear

regressions was to uncover the general behave of the increasing function relating the rising price

rate and economic increase.

GDPGt 1CPI t 2 CPI t 1

Where

GDPGt Gross domestic product growth over a year

& Parameters

CPI t Current years consumer price Index

The first regression equation signs making clear described that common having an effect equal to the

input framework. Even so, in above discussion we can easily described with the help of nearby studies

that edge blows are an accompaniment with a going higher price rate increasing some important value or
 Page 31 of 48

below some important values according to Smith, Boyd& Levine. In different words we can say that the

relation between going higher price and of money and goods increase does not move after one special

good example. In this based on experience framework board forming floor of doorway effects with

rough statement and discovery by reasoning related econometric offspring. To control of business right

results it is important to discover and make come into existence right ways of doing. In this current

important phase we give an account of a mindful and nontechnical idea of the methodology . In this

equation 1 signs making clear the main able to be changed record of user Price list of words in a book

(CPI) and user Price list of words in a book (CPI) work out the level of going higher price on Gross kept

by man product (level at which a country produces value) increase. The worked out answer from the

simple regression framework (1) is some in harmony, size, range, degree with the having existence

condition.
 Page 32 of 48

RESULT AND DISCUSSION

Gdp growth shows the up and down trend from 1951 to 2010.
 Page 33 of 48

Cpi (consumer price index ) shows the up ward trend from 1951 to 2010.

DATA & SUMMARY

OUTPUT

Regression Calculations
0.040735
Multiple R 816
0.001659
R Square 407
-
Adjusted R 0.033995
Square 614
2.488505
Standard Error 731
Observations 59

Analysis of Variance( ANOVA)

Significanc
Df SS MS F eF
 Page 34 of 48

Regressi 0.5764 0.2882 0.0465 0.9545626

on 2 21 1 41 69
346.78 6.1926
Residual 56 9 61
347.36
Total 58 54
Source: This study

Explanatory power of model is as low as 0.16% which is highly insignificant. As ANOVA table
shows very low F statistics of 0.04 (cutoff of F statistics is 4). Moreover the F statistics also
reflect that the model is insignificant.

Co- 95% 95%

efficient Stan- Error t Stat P-value Lower Upper
Interce 5.150097 0.4334986 11.880 6.18E- 4.281695 6.018499
pt 504 83 31 17 297 71
-
0.032026 0.1062595 0.3013 0.7642 0.180837 0.244889
CPI 099 04 95 3 26 46
- - -
0.035030 0.1175345 0.2980 0.7667 0.270480 0.200419
FDI 2 12 4 74 11 72

Ssource: This study

The insignificance of individual variables is also observed from t statistics which are 0.3 and
-0.29 respectively (cutoff of t is 2). Only intercept is significant which is further validated by p-
value as both the coefficients p-value are not less than 0.05.

Equation # 2 Estimation:
GDPGt CPI t
 Page 35 of 48

This equation shows the single variable Consumer price index at time t (CPIt) to estimate the
growth in GDP.

Regression Calculation
0.0087
Multiple R 07
7.58E-
R Square 05
-
Adjusted R 0.0174
Square 7
Standard 2.4685
Error 36
Observations 59

Analysis of Variance( ANOVA)

Significanc
df SS MS F eF
Regressi 0.0263 0.0263 0.0043 0.94781701
on 1 33 33 21 4
347.33 6.0936
Residual 57 91 68
347.36
Total 58 54
Source: This study

R-square shows goodness of fit which is very low which means overall model is not fit. ANOVA
table shows that very low F calculation of 0.004 (cutoff of F statistics is 4). F statistics also
indorses that the model is insignificant.
Co- Stan- 95% 95%
efficient Error t Stat P-value Lower Upper
Interce 5.126038 0.422498 12.132 1.98E- 4.279999 5.972076
pt 24 322 68 17 948 53
-
0.000412 0.006274 0.0657 0.9478 0.012152 0.012977
CPI 49 791 37 17 57 54
Source: This study

The insignificance of individual variable is also observed from t statistics which is 0.065 which
is less than too and it is further validated through p-value which is not less than 0.05. Only
intercept is significance
 Page 36 of 48

CONCLUDING REMARKS
 Page 37 of 48

This project main purpose of this based on experience according to the times of yearly knowledge

1951-2010 we work out the force of meeting blow of going higher price on of money and goods growth

in Pakistan. After work-place all the knowledge we found there is no force of meeting blow on growth

of going higher price in Pakistan. This phase is very important for Pakistan going higher price rate level

because is this printed material we discover out a point of view gradually coming into being a relation

between 2 able to be changed going higher price& of money and goods increase in Pakistan. In this

condition having an effect equal to the input regression test methodology given work to make statement

of the sense of words the relation about going higher price and of money and goods increase. look at the

relation between 2 able to be changed going higher price and of money and goods increase we used user

price list of words in a book (CPI) as a power of Attorney put forward in support for going higher price

and the Gross kept by man product (level at which a country produces value) as a power of Attorney put

forward in support for of money and goods increase. This important knowledge is be part of a stage in

time from 1951-2010. Using the regression framework I get the results of fixed, unchanging, unmoving

test. The nothing possible states being that there are formed of small units levels but not take care of to

slope down at first point or amount unlike inculpating that the things were discovered insignificance. So

not take care of to say no the possibility. As this work-place likeness to Manzoor Hussain (2005), his

discovering is same that the outcome is small so that there is no board forming floor of doorway level of

inflation in Pakistan so far as I found that insignificancy in result. According to Mubarik account the

board forming floor of doorway rate of level going higher price is 9percent in Pakistan. Even so, a go

higher in interest rates is often contemporaneous with an increase in going higher price is discovered to

have important positive effects on of money and goods increase up to 5% going higher price level rate.

In addition with this point, the force of meeting blow a go higher in interest rates is often

contemporaneous with an increase in going higher price on increase value is positive but influence.
 Page 38 of 48

After picture reasoning and reasoned opinion recommdation is to keep in Pakistan going higher price

within the range of 4 to 6 parts of a hundred. So it may be useful for able of being said (thing is true) of

money and goods increase. in the same way we can work-place the same Singhs idea 2003 addition. He

gives a detailed account of the rate of marking for attack going higher price range in India is 4 to 7 parts

of a hundred. So here we can say that going higher price in Pakistan is thing talked of about the request,

supply and stocks it is not a having a relation with to or having to do with surprising event completely.

To keep going higher price in control in Pakistan it should calls an agreement through Central Bank of

Pakistan (CBP).

Policy Implications
 Page 39 of 48

The study suggests that the policy maker should take tight policies against reduction of inflation growth

in the country by implementing the tools such as controlling money supply in the market through open

market operation, setting up interest rate and setting of bank reserve requirement.

Government of Pakistan should take serious steps to control the inflation rate such as reducing imports

& increasing exports, reducing government expenditures, give priority to agriculture sector, take serious

consideration to food prices, increase & utilize energy resources with low production cost and remove

security threats.

In the context of interest rate that includes very important instrument used by the State Bank of Pakistan.

Interest rates play a pivotal role in controlling inflation rate in the economy by increasing or decreasing

the level of interest rate. Continuous fluctuations in interest rate may decrease the confidence of

investors due to uncertainty about return on investment. Therefore policy makers should take serious

consideration about changing rate of interest rate while controlling inflation rate.

Interest rate should be stable to generate deposits in the banks therefore; people have the change to save

money in the bank instead of investing anywhere else.

The result of the current study shows positive impact of the exchange rate on the economy of Pakistan.

A strong exchange rate leads low cost of production with cheap imports and also helps to control

inflation due to low prices of foreign goods and services. Therefore study suggests to the policy makers

to maintain high exchange rate in order to boost up the economy of Pakistan.

REFRENCES
 Page 40 of 48

R.Barro Vol 78(1996). Inflation and growth, Reserve Bank of St. Louis Review.

Robert J Barro Cambridge press (1997) Determinants of Economic Growth: a Cross Country
Empirical Study.

M.Bruno, and Easterly,( 1998) Vol.41Inflation crises and long-run growth, Monetary Journal.

S.Fischer,(1993) Vol.32 The role of macroeconomic factors in economic growthMonetary

Economics journal.

Sahay Ratna, Stanley, Fischer, and Vgh, (1996) Vol.10, Stabilization and Growth in Transition
Economies: The Early Experience, economics journals.

Bruce, Hansen (1999), Vol.93 econometrics journal. Threshold Effects in Non-Dynamic Panels
Estimation, Testing and Inference.

Hansen, Sample Splitting and Threshold Estimation, May (2000), Vol. 68

Chowdhury and A Hussain, (1996) LONDON. Monetary and Financial Policies in Developing
Countries.

Khan, A., 2000.FEDERAL RESERVE BANK OF PHILADELPHIA, February (2000) The

finance and growth nexus. Business.

S. Senhadji and, Mohsin S khan. (2000) IMF Working Paper Threshold Effects in the
Relationship between Inflation and Growth.

Renelt. D and R.Levine,( 1992)American economic review ,vol.82 A sensitivity analysis of

cross-country growth Regressions.

Yasir Ali Mubarak (2005) volume 1, no 1 (2005) Inflation and Growth: An Estimate of the
Threshold Level of Inflation in Pakistan State Bank of Pakistan Research Bulletin.
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K. Chowdhury and Kearny, (1997).Vol. 29 Inflation and economic growth: a multi-

Country empirical analysis

Michael, sarel, (1996), Nonlinear Effects of Inflation on Economic Growth, IMF

Papers, vol 43(march) International Monetary Fund.

Kaliappa K and K. Singh. (2003) Journal of policy Modeling. The Inflation-Growth Nexus in
India: An Empirical Analysis Vol .25.

International Research Journal of Finance and Economics

Vol. 17 (2008) EuroJournals Publishing, Inc.

Alexander Bick. Department of Economics,Threshold eects of Rising Price on economic

Increase in developing countries

Alexander Bick Department of Economics, Goethe University Frankfurt.

Working Paper Series: WP 0604Rising Price and Economic Increase in Bangladesh:

Ahmed Shamim and Golam Mortaza December ,(2005) Policy Analysis Unit,
Research Department, Bangladesh Bank.

Rising Price on Economic Increase: Evidence From Four South Asian Countries
Mallik Girijasankar and Chowdhury Anis Asia-Pacific Development Journal, Vol. 8, No. 1, June
(2001) Indian
Economic Service.

Rising Price on Economic Increase in India An Empirical Analysis .Prasanna V

Salian1,Gopakumar. K2

Manzoor Hussain. October 2005, Rising Price and Increment: Estimation of Threshold Point
For Pakistan.Economic Policy Department, State Bank of Pakistan.

Xiao Jing.(2007)The Relationship between Rising Price and Economic Increase of China.

Gokal Vikesd & Hanif Subrina.Relationship between Rising Price and Economic Increase.
Working Paper Vol. 4 December 2004 Economics Department Reserve Bank of Fiji Suva Fiji.
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MinliVol 14 (2005).Rising Price and Economic Increase: Threshold Effects and Transmission
Mechanisms
Department of Economics, University of Alberta.

Bhamani, N.S., (2007). COMMENT: vessel of empowerment, The Daily Newspaper

Dawn dated May 20, 2007.

Chien-Chiang Lee and Swee Yoong Wong Vol.3 no.2(2010), National Chung Hsing University
Journal :Sustainable Development:
Rising Price and Economic Increase in Nigeria Economic department.

Barro, J. Robert (1995). Inflation and Economic Growth. Bank of England Quarterly Bulletin, vol. 35,
pp. 166-176.

Faria, Ricardo Joao & Carneiro, Galrao Francisco (2001). Does High Inflation Affect Growth in the
Long-run and Short-run? Journal of Applied Economics, 4(1), pp. 89-105.
APPENDIX

RESIDUAL OUTPUT

Observatio Predicted GDP

n Growth Residuals
1 5.40966923 -7.2096692
2 5.375763562 -3.6757636
3 5.365025494 4.83497451
4 5.368555743 -3.3685557
5 5.363334031 -1.863334
6 5.377904791 -2.3779048
7 5.399285115 -2.8992851
8 5.372069023 0.12793098
9 5.372515079 -4.4725151
10 5.336530274 -0.4365303
11 5.318532279 0.68146772
12 5.318054904 1.8819451
13 5.306114643 1.19388536
14 5.264828627 4.13517137
15 5.227170583 2.37282942
16 5.176989977 -2.07699
17 5.108163708 1.69183629
18 5.076927116 1.42307288
19 5.046786647 4.75321335
20 5.128253878 -3.9282539
21 5.278901989 -2.978902
22 5.21439201 1.58560799
23 5.028316518 2.47168348
24 4.684031472 -0.7840315
25 4.810484597 -1.5104846
26 5.305675899 -2.5056759
27 5.211733901 2.4882661
28 5.136762926 0.36323707
29 5.04528812 2.25471188
30 4.909348436 1.49065156
RESIDUAL
OUTPUT

Predicted GDP Residual

Observation Growth s
31 4.986919241 2.613081
32 5.230122897 1.569877
33 5.172356402 -1.17236
34 5.101921824 3.598078
35 5.04391094 1.356089
36 4.99572828 0.804272
37 4.9373396 1.46266
38 4.833705186 -0.03371
39 4.713272626 -0.11327
40 4.579791295 1.020209
41 4.774154681 2.925845
42 5.21469871 -2.9147
43 5.108008203 -0.60801
44 4.97240905 -0.87241
45 4.81978924 1.780211
46 4.660808489 -2.96081
47 4.501411801 -1.00141
48 4.380753567 -0.18075
49 4.290647045 -0.39065
50 4.21437146 -2.21437
51 4.619359754 -1.51936
52 5.306156493 -0.60616
53 5.272613671 2.227386
54 5.207190193 3.79281
55 5.117518486 0.682482
56 5.029539172 1.770461
57 4.917318014 2.282682
58 4.71085618 -6.31086
59 4.449916928 -0.64992
Dependent variable: GDP growth.

Independent variable: CPI & FDI

Method : regression model

Observations : 60

Regression Calculations
0.040735
Multiple R 816
0.001659
R Square 407
-
Adjusted R 0.033995
Square 614
2.488505
Standard Error 731
Observations 59

Analysis of Variance( ANOVA)

Significanc
df SS MS F eF
Regressi 0.5764 0.2882 0.0465 0.9545626
on 2 21 1 41 69
346.78 6.1926
Residual 56 9 61
347.36
Total 58 54

Co- 95% 95%

efficient Stan- Error t Stat P-value Lower Upper
Interce 5.150097 0.4334986 11.880 6.18E- 4.281695 6.018499
pt 504 83 31 17 297 71
-
0.032026 0.1062595 0.3013 0.7642 0.180837 0.244889
CPI 099 04 95 3 26 46
- - -
0.035030 0.1175345 0.2980 0.7667 0.270480 0.200419
CPI_1 2 12 4 74 11 72
Dependent variable: GDP growth.

Independent: CPI.

Method: regression model.

Observations: 60

Regression Calculation
0.0087
Multiple R 07
7.58E-
R Square 05
-
Adjusted R 0.0174
Square 7
Standard 2.4685
Error 36
Observations 59

Analysis of Variance( ANOVA)

df SS MS F Significance F
Regression 1 0.026333 0.026333 0.004321 0.947817014
Residual 57 347.3391 6.093668
Total 58 347.3654

Co- Stan- 95% 95%

efficient Error t Stat P-value Lower Upper
Interce 5.126038 0.422498 12.132 1.98E- 4.279999 5.972076
pt 24 322 68 17 948 53
CPI 0.000412 0.006274 0.0657 0.9478 - 0.012977
 0.012152
49 791 37 17 57 54

GRAPHICAL REVIEW