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DOES VOLATILITY IN GOVERNMENT BORROWING LEADS TO HIGHER INFLATION? EVIDENCE FROM PAKISTAN

S. Adnan, H.A.S. Bukhari and Safdar Khan

Journal of Applied Economic Sciences, 2008, vol. 3, issue 3(5)_Fall2008, 187-202

Abstract: This study analyzes the impact of volatility in government borrowing from central bank (GBCB) on domestic inflation in Pakistan. This paper utilizes Generalized Auto Regressive Conditional Hetroskedasticity (GARCH) model to estimate volatility in GBCB using monthly data from July 1992 to June 2007. The empirical results, based on auto regressive distributed lag (ARDL) with bound testing technique suggest that domestic inflation in Pakistan is related with volatility in government borrowing from central bank in the long run. Furthermore, error correction model (ECM) estimates show that in the short run, inflation is also affected by volatility in GBCB.

Keywords: inflation; government borrowing; volatility; GARCH; ARDL; ECM (search for similar items in EconPapers)
JEL-codes: E31 E60 E62 (search for similar items in EconPapers)
Date: 2008
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Working Paper: Does Volatility in Government Borrowing Leads to Higher Inflation? Evidence from Pakistan (2007) Downloads
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