THE RELATIONSHIP BETWEEN MONEY SUPPLY, PRICE LEVEL AND ECONOMIC GROWTH IN PAKISTAN: KEYNESIAN VERSUS MONETARIST VIEW

Abdul Mansoor, Quratulain Shoukat, Shagufta Bib, Khushbakht Iqbal, Omana Saeed and Khalid Zaman ()
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Abdul Mansoor: Department of Economics, University of Wah, Quaid Avenue, Wah Cantt, Pakistan
Quratulain Shoukat: Department of Economics, University of Wah, Quaid Avenue, Wah Cantt, Pakistan
Shagufta Bib: Department of Economics, University of Wah, Quaid Avenue, Wah Cantt, Pakistan
Khushbakht Iqbal: Department of Economics, University of Wah, Quaid Avenue, Wah Cantt, Pakistan
Omana Saeed: Department of Economics, University of Wah, Quaid Avenue, Wah Cantt, Pakistan

Review of Economic and Business Studies, 2018, issue 22, 49-64

Abstract: The objective of the study is to examine the relationship between money supply, price level and economic growth in the context of Pakistan by using Autoregressive Distributed Lag (ARDL) model, covered a period of 1980 to 2016. The results confirm the long-run relationship between the variables while using broad money supply as a response variable. However, in the price and income modeling, the variables do not support the cointegration relationship between the variables. The causality results confirmed the unidirectional relationship running from income to money supply, which implies that income do causes money supply in the short run, whereas money supply leads to inflation to support Monetarist view of inflation in a country. The results conclude that economic growth is imperative to stabilize money supply and price level through sound economic policies in a country.

Keywords: Money supply; Income; Price level, ARDL; Pakistan. (search for similar items in EconPapers)
Date: 2018
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