P-Star Model: A Leading Indicator of Inflation for Pakistan

Abdul Qayyum and Faiz Bilquees

MPRA Paper from University Library of Munich, Germany

Abstract: The P-star inflation model is based on the long-term quantity theory of money and puts together the long-term determinants of the price level and the short-run changes in current inflation. The P-star model-based indicator has replaced the previous monetary policy procedures in a number of countries because it offers by far more information and predictive power than monitoring movements in money supply and the rate of monetary growth. In this paper we used the P-star model to calculate the leading indicator of inflation, and also to test the forecasting performance of the P-star model-based leading indicator of inflation. The results of the study show that compared to the simple autoregressive model and the M2 growth augmented model, the P-star model can be used to obtain the leading indicator of inflation in Pakistan because it has additional information about the future rate of inflation. Therefore, this paper provides a useful tool to the policy-makers to assess the future movement of inflation in Pakistan.

Keywords: Inflation; P-star model; Forecasting: Pakistan (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2005, Revised 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published in The Pakistan Development Review 2.44(2005): pp. 117-129

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/2058/1/MPRA_paper_2058.pdf original version (application/pdf)

Related works:
Journal Article: P-Star Model: A Leading Indicator of Inflation for Pakistan (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:2058

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().