Inflation & Money Supply
Inflation & Money Supply
Econ 302
Fall Semester
Salman Sharoon John
09-15103
Department Of Economics
FORMAN CHRISTIAN COLLEGE
(A Chartered University)
Acknowledgements: I would like to thank Mr. Zahid Iqbal, Luqman Saeed & Keizer Xavier for the help and all the time needed in knowing and studying the variables and helping in this research paper.
Introduction:
Inflation is a burning issue in Pakistan. Pakistan has double digit inflation. The factor determine the inflation, first of all money supply are the major determinant of the inflation. In case of Pakistan concluded that in the long run excess money supply is the main factor responsible for inflation. The data given below is from year (1998-2008). Data shows that how much percentage change was change every year.
Controlling inflation is a high priority for policy-makers. But the instability of the economy it is not possible to control inflation. Every year the percentage of inflation will increase, some other determinants are discussed. Inflation is also determines on imports, so government increase the taxes on imports, if the imports will reduce and the exports will increase the rate of inflation must be decreased.
The background disinflation policy in many countries is framed with the objective of constraining monetary growth to be in line with the expansion in nominal income. Hence, an increasing number of countries have granted their central banks autonomy in the hope that it will insulate them from having to accommodate imprudent fiscal policies. Money demand should depend on expectations about future inflation; a purely monetary effort at reducing inflation may not be successful. Theoretically, once account is taken of forward-looking expectations, multiple equilibrium paths for inflation can coexist. Under such circumstances, money supply alone may not be sufficient to pin down the time path of inflation. Against this background,
Econ 302
Fall Semester
Salman Sharoon John
09-15103
Department Of Economics
FORMAN CHRISTIAN COLLEGE
(A Chartered University)
Acknowledgements: I would like to thank Mr. Zahid Iqbal, Luqman Saeed & Keizer Xavier for the help and all the time needed in knowing and studying the variables and helping in this research paper.
Introduction:
Inflation is a burning issue in Pakistan. Pakistan has double digit inflation. The factor determine the inflation, first of all money supply are the major determinant of the inflation. In case of Pakistan concluded that in the long run excess money supply is the main factor responsible for inflation. The data given below is from year (1998-2008). Data shows that how much percentage change was change every year.
Controlling inflation is a high priority for policy-makers. But the instability of the economy it is not possible to control inflation. Every year the percentage of inflation will increase, some other determinants are discussed. Inflation is also determines on imports, so government increase the taxes on imports, if the imports will reduce and the exports will increase the rate of inflation must be decreased.
The background disinflation policy in many countries is framed with the objective of constraining monetary growth to be in line with the expansion in nominal income. Hence, an increasing number of countries have granted their central banks autonomy in the hope that it will insulate them from having to accommodate imprudent fiscal policies. Money demand should depend on expectations about future inflation; a purely monetary effort at reducing inflation may not be successful. Theoretically, once account is taken of forward-looking expectations, multiple equilibrium paths for inflation can coexist. Under such circumstances, money supply alone may not be sufficient to pin down the time path of inflation. Against this background,