Abstract
Inflation is one of the main issue faced by less developed countries. In addition to the distortion of income distribution, inflation adversely affect poverty level and expectations of business enterprises. Like all Central monetary authorities in less developed countries, State Bank of Pakistan (SBP) formulates monetary policy to control inflation in Pakistan. A lot of studies have been employed to examine direct contemporaneous effects of money supply growth on inflation rate in Pakistan, however the effects of variability in money supply has so far not been examined well. This study is an attempt to examine the impact of monetary variability on inflation rate in Pakistan. We have estimated monetary variability for M2 using simple moving variance of the time series for its being the most resorted to practice in applied statistics. Simple graphical techniques are used to examine response of inflation rate (and growth of GDP) to monetary variability over 1950-2010. Simple statistical techniques (i.e. graphs for various time spaces) reveal that monetary variability is directly related to inflation rate in Pakistan. In light of the key findings of the study, it is suggested that SBP need to control monetary variability along with money supply growth to control inflation in Pakistan
Asmat Ullah, , Bashir Ahmad Khilji, Syed Waqar Hussain. (2013) Monetary Variability, Output and Inflation in Pakistan: A Simple Statistical Approach, Journal of Managerial Sciences, Volume 7, Issue 2.
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