Threshold Modeling for Inflation and GDP Growth

Dr. Gulnaz Hameed, Sidra Nazir, Atta Muhammad and Saira Saeed

MPRA Paper from University Library of Munich, Germany

Abstract: The study has evaluated the relationship between the inflation rate and GDP growth of Pakistan using the annual data of inflation rate and GDP growth since 1972 to 2016 for Pakistan. The paper has used the different techniques like; OLS, FMOLS, TAR and dummy method threshold model, to estimate the true relationship between the concerned variables based on the previous studies those gives mixed results. The study has concluded the positive relationship between the inflation rate and economic growth of Pakistan at 5.5% to 9% threshold level of inflation and confirmed the nonlinear relationship between them. And low and double figure inflation rate are considered to have adverse effect on the economic growth of the Pakistan. So to stimulate the stable economic growth of Pakistan we need to have medium rate of inflation.

Keywords: Inflation rate; GDP growth; threshold level; nonlinear relationship (search for similar items in EconPapers)
JEL-codes: C22 E00 O11 (search for similar items in EconPapers)
Date: 2017, Revised 2018
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Working Paper: Threshold Modeling for Inflation and GDP Growth (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:90130

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