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Asymmetric Shocks and Co-movement of Price Indices

Nasir Hamid Rao () and Syed Bukhari ()
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Nasir Hamid Rao: US Embassy, Islamabad

No 38, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: This paper is an attempt to gauge the relationship between the long run paths of consumer price index and wholesale price index of Pakistan. For the empirical analysis the Johansen co-integration technique has been applied on monthly data (1978 to 2010) of WPI and CPI. This paper found that both the indices are co-integrated in the long run. Thus the deviations in movements of WPI and CPI in the short run are transitory and both the indices will converge to their coherent path in the long run. Therefore, inflation computed from CPI can be used as official measure of inflation without worrying for short run ovements of WPI.

Keywords: Price level; time series models; monetary policy (search for similar items in EconPapers)
JEL-codes: E31 C32 E52 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011-02
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Related works:
Working Paper: Asymmetric Shocks and Co-movement of Price Indices (2011) Downloads
Working Paper: Asymmetric Shocks and Co-movement of Price Indices (2010) Downloads
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