Causality Between Money and Prices: Evidence from Pakistan

Fazal Husain () and Tariq Mahmood

MPRA Paper from University Library of Munich, Germany

Abstract: The objective of the paper is to re-examine the causal relationship between money and prices in Pakistan using recent data and employing cointegration and error correction models. Two measures of prices (CPI and WPI) and three measures of money stocks (M0, M1, and M2) were taken for the period July 1981 to June 1998. The analysis indicates a long run relationship between prices and M2 definition of money. The other definitions of money do not seem to be related with prices. The analysis further suggests a unidirectional causality running from money to prices and thus supporting the monetarists’s claim regarding the role of money. The results, however, are different from the findings of earlier studies in Pakistan which generally report bidirectionl causality between prices and money.

Keywords: Money; Prices; Pakistan; Causality; Long Run Relation (search for similar items in EconPapers)
JEL-codes: E3 E5 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (5)

Published in The Pakistan Development Review 4.37(1998): pp. 1155-1161

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Related works:
Journal Article: Causality between Money and Prices: Evidence from Pakistan (1998)
Working Paper: Causality between Money and Prices:Evidence from Pakistan (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:5021

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