Abstract
The central objective of this paper is to find the validity of cost-push and monetary factors on GDP deflator through empirical analysis. The empirical analysis has been conducted by using the technique of Ordinary Least Square using annual data for the period from 1971-72 to 2006-07. Before applying OLS the stationarity of the data was checked by Augmented Dickey Fuller (ADF) test. Regression analysis proves that both cost-push and monetary factors are influenced on wholesale price index. The monetary variables have significant impact on GDP deflator.. There is no single remedy to control the raise of wholesale price index. Government should adopt multipurpose strategy such as improvement in tax and revenue structure, improving fiscal and monetary discipline, removing supply side disruptions, eradication of anti-competitive market practice.
Highlights
1.1 Cost-push shocks and monetary policyThe main objective of this study is to present comprehensive and updated concept of the composition of cost-push shocks, and monetary policy that are compulsory to solve the important economic problems facing Pakistan like inflation, low wage rate, low real gross domestic product and to recommend some solutions to curb these troubles
The central objective of this paper is to find the validity of cost-push and monetary factors on gross domestic product (GDP) deflator through empirical analysis
The coefficients of all variables in above regression are statistically significant except GDP and wheat support price which are not statistically significant even at 10% level of significance
Summary
The main objective of this study is to present comprehensive and updated concept of the composition of cost-push shocks, and monetary policy that are compulsory to solve the important economic problems facing Pakistan like inflation, low wage rate, low real gross domestic product and to recommend some solutions to curb these troubles. Akhtar (2006) says that consumer price Index is the important tool of measuring price changes of fixed basket of goods and services. In Pakistan first time, the consumer price index was determined as base for manufacturing employees in metropolises of Lahore, Karachi and Sialkot in 1948-49. 1959-60, 1969-70, 1975-76, 1980-81 and 1990-91 are taken as base years for the consumer price index. Consumer price index is determined on the fixed price of year 2000-0. The study of consumer price index is reported that inflation rate during the fiscal year 2000-01, 2001-02 4.41 and 3.54 respectively. In fiscal years 2003-04 and 2004-05 inflation rate is again raised to 4.57 and 9.28 respectively. By the mid of the October, 2006, inflation rate is reported 8.43 percent
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