Abstract
It is the biggest task to control inflation in the economy that macroeconomic policymakers face. The purpose of this research is to highlight the main sources of inflation using data for the time span from 1980 to 2012 in economy of Pakistan. This article attempts to analyze their long-run relationship using (ARDL) an autoregressive distributed lag model for the foresaid period. It is analyzed that Money supply, exchange rate and Total reserve changes inflation to 0.16, 2.12, and 0.36 percent points respectively by one percent rise in long run. The Error Correction model with negative sign remained statistically significant with the roundabout 81% speed of adjustment to restore the equilibrium in the long run, which was convergent quickly.
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