Major Agents Influencing Inflation in Pakistan

Abstract

An econometric analysis of inflation and economic growth in Pakistan from 1995 to 2018 was analyzed in this article. Deficits in government spending and a high money supply contributed to inflation. Inflation is expected to fall as a result of increased GDP. To combat inflation, the money supply is restricted and the exchange rate is regulated to keep prices stable. As a result of the need for lower inflation, imports are less likely to be limited. Economic growth was bolstered by the development of human capital and investment and value-added activities in agriculture and industry. When these factors are considered, the Pakistani economy is expected to do well. It was determined that the inflation and economic growth models had been properly specified and tested. Stability was examined over two time periods. The CPI remained relatively stable in both periods, whereas the second period's GDP fluctuated.