Abstract
In this paper we investigated the role of gold prices, interest rate and exchange rate against inflation in Pakistan both in the long and the short run, utilizing time series data over the period of 1975- 2013 under the Johansen co-integration and vector error correction specifications. The results suggest that gold prices and interest rate are significantly positively related with inflation in the long run in the case of Pakistan, indicating that a rise in gold prices and interest will result in increase in inflation in Pakistan. Whereas exchange rate is found to be insignificant to impact inflation over the length of this study. However exchange rate is found to have significantly and negatively associated with inflation in the short run. That means that appreciation in rupee (PKR) will result in decrease in inflation and vice versa.
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