Three Attempts at Inflation Forecasting in Pakistan

Author/Editor:

International Monetary Fund

Publication Date:

May 1, 2005

Electronic Access:

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Summary:

This paper presents three empirical approaches to forecasting inflation in Pakistan. The preferred approach is a leading indicators model in which broad money growth and private sector credit growth help forecast inflation. A univariate approach also yields reasonable forecasts, but seems less suited to capturing turning points. A vector autoregressive (VAR) model illustrates how monetary developments can be described by a Phillips-curve type relationship. We deal with potential parameter instability on account of fundamental changes in Pakistan's economic system by restricting our sample to more recent observations. Gregorian and Islamic calendar seasonality are addressed by using 12-month moving averages.

Series:

Working Paper No. 05/105

Subject:

English

Publication Date:

May 1, 2005

ISBN/ISSN:

9781451861242/1018-5941

Stock No:

WPIEA2005105

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

37

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