Estimating Standard Error of Inflation in Pakistan: A Stochastic Approach

Javed Iqbal and Muhammad Hanif

No 46, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: We estimate standard errors (S.Es.) of month on month and year on year inflation in Pakistan based on data for the period of July 2001 to June 2010 using stochastic approach as well as extended stochastic approach to index numbers. We develop a mechanism to estimate S.E. of period average headline inflation using these approaches. This mechanism is then applied to estimate S.Es. of 12-month average inflation in Pakistan for July 2003 to June 2010. The systematic changes in the relative prices of different groups in the CPI basket for Pakistan are also estimated. The highest (positive) relative price inflation occurred in ‘food, beverages and tobacco’ group and lowest (negative) for ‘recreation and entertainment’ group, during FY01 to FY10.

Keywords: Inflation; relative prices; Pakistan (search for similar items in EconPapers)
JEL-codes: C22 E31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-01
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Related works:
Working Paper: Estimating Standard Error of Inflation in Pakistan: A Stochastic Approach (2012)
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