It is generally accepted that the effect of money supply changes is transmitted into output and inflation, though with some lags. If this hypothesis cannot be rejected empirically, then we can say that monetary factors play an important role in determining inflation. To find out whether this has happened in Pakistan is the key objective of this study. We have tested this hypothesis empirically by applying the Near-VAR approach to estimate impulse response functions, and the Granger causality test to fînd out the direction of causality between reserve money (central bank's operational target) and real GDP gap and reserve money and inflation. Both tests confirm that the above hypothesis cannot be rejected. The second objective is to estimate the central bank's money reaction function. It is found that the monetary authority's degree of leaning against the wind is almost zero.
The Pakistan Development Review started at the Pakistan Institute of Development Economics as Economic Digest in 1958, The Pakistan Development Review (PDR) has been published by the Institute regularly since 1961, with only a short pause during 1971-72. For several decades now, it has been a refereed international journal of Economics and related social sciences. Redesigned and re-planned twice in the last two decade, the contents have tended to emphasise theoretical-cum-empirical contributions; the underlying commitment has been to strengthen the interest in the general areas of Economics and other social science fields. The journal is issued quarterly and, with a fair mix of topics, regularly contains original (theoretical and empirical) contributions to Economics, in general, and on Pakistan’s socio-economic problems, in particular. Nearly every issue carries contributions by scholars from Pakistan and overseas. Currently, the following editors work regularly on the PDR: Dr Rashid Amjad Chaudhry (Editor) and Professor Aurangzeb A. Hashmi (Literary Editor). The Review’s Editorial Board consists of thirty-six outstanding scholars in the field of Economics and various social science fields. They actively participate in refereeing the papers Publications and Research Information submitted to the Review for publication; they also render valuable advice on other related matters.
The Pakistan Institute of Development Economics was established at Karachi in 1957 and in 1964 accorded the status of an autonomous research organization by the Government of Pakistan. It is devoted to theoretical and empirical research in Development Economics in general and on Pakistan-related economic issues in particular. In addition to providing a firm academic basis to economic policy-making, its research also provides a window through which the outside world can view the nature and direction of economic research in Pakistan. Other social sciences, such as demography and anthropology and interdisciplinary studies increasingly define the widening scope of research that must be undertaken for proper economic policy and development to have sound underpinnings. Over the past 50 years PIDE has earned an international reputation and recognition for its research. Our faculty is rich and our advisory committee consists of world renowned economists such as Nobel Laureate Robert A. Mundell. PIDE is located at the Quaid-i-Azam University Campus in Islamabad, the capital of Pakistan. The campus rests against the backdrop of the Margalla hills on the Potohar Plateau, within a short distance of the remains of Taxila, which once housed the world's oldest university. Archaeological remains discovered in this area show that it has been a center of civilization for some 5,000 years. The Institute, neighbor to several other academic outfits situated in this historic and scenic part of the green foothills of the great South Asian mountain ranges, is the hub of economic and social science research in this part of the world.
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