## 1. Inflation and Monetary Growth

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---

### Introduction and research question
- Understanding the drivers of inflation is fundamental to designing monetary policy.
- Two contrasting views:
  - Monetarist view: inflation is a monetary phenomenon (Friedman, 1963).
  - Structuralist/supply-side view: supply constraints (e.g., wheat support price increases) can drive up specific goods and have wider repercussions on the overall price level.
- Central policy question for Pakistan: “money or wheat”: whether inflation is primarily driven by monetary factors (central bank/fiscal policy responsibility) or by wheat support price increases (Ministry of Agriculture relevance).

### Recent inflation and monetary/wheat price developments (1998–2005)
- After the 1998/99 crisis, inflation was reduced to below 5 percent by 2000 and remained stable through 2003.
- Inflation accelerated starting in late 2003 as monetary growth picked up, with inflation:
  - peaking at 11 percent year-on-year in April 2005,
  - and average annual inflation appearing to stabilize around 8 to 9 percent by September 2005.
- Inflation follows broad money growth and private sector credit growth closely with a lag of about 12 months.
- Wheat support price increases occurred in:
  - September 2003,
  - September 2004,
  - (the support price was raised again in September 2005).
- Wheat share in CPI:
  - wheat accounts for only ½ percent of the Consumer Price Index (CPI) basket,
  - wheat and wheat-related products (flour) account for 5.1 percent of the CPI basket.
- Note: According to the State Bank of Pakistan (SBP) a change in the methodology of deriving the house rent index may also be partly responsible for the observed slowdown in headline inflation.

### Model, data, and estimation sample
- Stylized inflation model includes:
  - monetary variables (money supply, credit to the private sector),
  - the exchange rate,
  - the wheat support price as a supply-side factor.
- Estimated with monthly data for the period January 1998 to June 2005.

### Key empirical findings
- Monetary factors are the main drivers of inflation in Pakistan over the sample period.
  - Monetary factors affected inflation with a lag of about one year.
- The wheat support price affects inflation in the short run.
- The wheat support price matters for inflation over the medium term only if accommodated by monetary policy.
- Analysis supports that recent inflation acceleration (late 2003–2005) was driven primarily by monetary growth, with short-run contributions from wheat support price increases.

### Basic elements of the model
- Structuralist models emphasize supply-side factors (food prices, administered prices, wages, import prices) as determinants of inflation; monetary developments are given little importance.
- Stylized hybrid “monetarist-structuralist” model used:
  - Open-economy monetary model (short-run form): p& = f(m&, y&, r, v, e).
  - Augmented with wheat support price w: w enters the function alongside monetary and real variables.
- Monetarist implications: with constant velocity v, inflation p& results if money growth m& exceeds real GDP growth y&; interest rate r reduces money demand; financial deepening affects velocity.
- Wheat support price can have short-run impact on inflation, and possibly long-run impact on the price level (but not inflation).
- For non-stationary series, the specification reflects short-run relationships unless cointegration is present.

### Data and sample (details)
- Sample: January 1998 to June 2005 (monthly).
- Main variables:
  - CPI: headline inflation.
  - Monetary variables: Broad money; private sector credit; 6-month treasury bill (T-bill) rate.
  - Activity: interpolated real and nominal GDP (12-month moving average of fiscal year GDP); large scale manufacturing index (LSM).
  - Exchange rate: nominal effective exchange rate (NEER).
  - Wheat support price: guaranteed minimum government purchase price.
- Log levels of all variables are nonstationary; most variables integrated of order one; interpolated real and nominal GDP series integrated of order two.
- Seasonality controlled using 12-month moving averages for growth-rate regressions; monthly dummies and Islamic calendar controls for log-level regressions.

### CPI inflation — short-run ADL findings
- Model estimated as ADL using PcGets with 12 lags; summary coefficient β measures long-run impact after dynamics: β = (1/A(1)) B(1).
- Preferred specifications:
  - M3: CPI inflation as function of broad money growth, real GDP growth, NEER appreciation, and average annual wheat support price change.
  - M4: CPI inflation as function of private sector credit growth, real GDP growth, and average annual wheat support price change.
- Empirical highlights:
  - Monetary factors and the wheat support price are determinants of inflation in the short run.
  - Real GDP growth matters.
  - NEER appreciation has some impact.
  - Monetary growth impacts inflation with a lag of around 12 months.
  - M3 includes 7 and 11 month lags of broad money growth.
  - M4 includes 1, 3, 5, 10, and 12 month lags for private sector credit growth.

### Vector Error Correction Model (long-run relationships)
- VECM analysis focused on reduced systems to identify cointegration.
- A meaningful cointegrating relationship exists only for the VECM including private sector credit but not for broad money.
- Preferred VECM (CPI, Private Sector Credit, Wheat Support Price) with monthly dummies and Islamic calendar controls; reduced system (without real GDP) has cointegrating rank of one.
- Cointegrating vector (equation (6)):
  - cpi =   1.733   + 0.205 * credit  + 0.004 * wheat  + 0.002 * trend
    - t-statistics shown in parentheses indicate wheat support price is not part of the long-run relationship.
- Simplified cointegrating vector after dropping seasonal controls (equation (7)):
  - cpi =   0.994   + 0.263 * credit  + 0.001 * trend
- Interpretation:
  - Wheat support price affects CPI only in the short run, not in the long run.
  - Private sector credit impacts CPI in both the long run and short run.
  - Loading coefficient for CPI equation indicates 23 percent of a deviation from the long-run relationship is adjusted in the next period.
- Impulse response functions (generalized 1-standard deviation impulses):
  - CPI initially falls in response to innovations in private sector credit or the wheat support price (price puzzle), then increases after 2–4 months.
  - Impact of an impulse to private sector credit is more pronounced than to the wheat support price.

### Broad money VECM attempt and interpretation
- No meaningful VECM containing broad money could be identified in the sample despite experiments with systems including CPI, broad money, NEER, real GDP, and wheat support price.
- Likely reason: ongoing changes to money demand and fundamental relationships (nonconstant coefficients) during the sample (1998/99 crisis and reforms); recursive coefficients found to diverge or fluctuate in prior studies.
- De Grauwe and Polan (2005) note quantity theory relationships are hard to identify in countries with inflation less than 10 percent.

### Graphical analysis (wheat support price episodes)
- Three episodes of wheat support price increases: September 1999, September 2003, September 2004.
- Contrasts in 12 months after increases (broad money and credit growth lagged 12 months):
  - 1999 increase: monetary growth subdued, inflation remained low; slight headline inflation increase in mid-2000 driven by nonfood inflation — wheat support price played little role.
  - 2003 and 2004 increases: monetary growth high and accelerating; triggered acceleration in nonfood inflation and larger acceleration in food inflation — wheat support price may have contributed, but accommodating monetary conditions enabled second-round effects.
- Domestic wheat prices generally follow international prices; pronounced domestic increase after May 2003 started before wheat support price was raised, implying international price influence.

### Why worry about inflation? (impacts and thresholds)
- High and persistent inflation is regressive, erodes savings of the poor, and inhibits optimal resource allocation.
- Nonlinear inflation–growth relationship with thresholds:
  - Khan and Senhadji (2001): threshold 1–3 percent for industrial countries and 7–11 percent in developing countries.
  - Khan (2005) for a Middle East and Central Asian sample including Pakistan: optimum inflation rate 3 percent; keep inflation below 6 percent to avoid negative growth impact.
  - Mubarik (2005) for Pakistan (1973–2000): inflation in excess of 9 percent harms short-run growth.
  - Hussain (2005) for Pakistan: threshold 4–6 percent beyond which inflation harms growth.
- Inflation and financial development:
  - Khan, Senhadji, and Smith (2005): threshold about 3–6 percent (panel of 168 countries); inflation above threshold adversely affects financial development.
- Pakistan historical perspective:
  - 1978–1991: inflation 8 percent on average; real per capita growth averaged 3 percent.
  - 1992–1997: inflation averaged 11 percent; real per capita growth averaged 1 percent.
  - Since 1998: inflation reduced to average 5 percent; real per capita growth recovered.
- Conclusion: SBP’s inflation target of 5 percent is appropriate to avoid double-digit inflation risks and safeguard growth and financial development.

### Summary findings
- Monetary factors determine inflation in Pakistan:
  - Broad money growth and private sector credit growth are key variables explaining inflation with a lag of around 12 months.
  - A long-run relationship exists between CPI and private sector credit.
  - Wheat support price impacts inflation only in the short run, not in the long run.
- Short-run and medium-run dynamics:
  - There is a fairly stable relationship between private sector credit growth and inflation 12 months ahead; similarly for broad money growth.
  - Monetary growth impacts inflation with a lag of around 12 months.
- Concise answer to “money or wheat?”: “money”!

### Policy recommendations and implications
- Overarching objective for the State Bank of Pakistan (SBP): price stability.
- SBP should focus policies to keep inflation close to its target of 5 percent.
- Exchange rate targeting as a nominal anchor is not recommended because it implies adopting the anchor country’s monetary policy, may yield a suboptimal inflation rate, and removes the exchange rate as an instrument to offset external shocks.
- Preference for targeting core inflation:
  - Core inflation (approximated as nonfood, nonenergy or SBP’s trimmed mean) is a better measure of underlying inflation trends than headline inflation.
  - Core inflation is the right target for monetary policy in the medium term, but SBP must also monitor headline inflation due to its immediate household effects and public salience.
- Forward-looking monetary policy:
  - Set policy today with a view to meeting the inflation target around one year from now because current monetary conditions transmit to inflation with about a 12-month lag.
  - Monitor private sector credit growth and broad money growth as leading indicators of inflation 12 months ahead.

*Source: _wp0660 - 1. Inflation and Monetary Growth (PDF), January 1998–June 2005 data and analysis.**

### 1. Inflation and Monetary Growth  ......................................................................................

### 1. Inflation and Monetary Growth

### Introduction and research question
- Understanding the drivers of inflation is fundamental to designing monetary policy.
- Two contrasting views:
  - Monetarist view: inflation is a monetary phenomenon (Friedman, 1963).
  - Structuralist/supply-side view: supply constraints (e.g., wheat support price increases) can drive up specific goods and have wider repercussions on the overall price level.
- In Pakistan the central policy question is framed as “money or wheat”: whether inflation is primarily driven by monetary factors (central bank/fiscal policy responsibility) or by wheat support price increases (Ministry of Agriculture relevance).

### Recent inflation and monetary/wheat price developments (1998–2005)
- After the 1998/99 crisis, inflation was reduced to below 5 percent by 2000 and remained stable through 2003.
- Inflation accelerated starting in late 2003 as monetary growth picked up, with inflation:
  - peaking at 11 percent year-on-year in April 2005,
  - and average annual inflation appearing to stabilize around 8 to 9 percent by September 2005.
- Inflation follows broad money growth and private sector credit growth closely with a lag of about 12 months (Figure 1 describes CPI inflation and credit/broad money growth lagged 12 months).
- The acceleration in inflation coincided with increases in the wheat support price in:
  - September 2003,
  - September 2004,
  - (the support price was raised again in September 2005).
- Wheat share in CPI:
  - wheat accounts for only ½ percent of the Consumer Price Index (CPI) basket,
  - wheat and wheat-related products (flour) account for 5.1 percent of the CPI basket.
- Note: According to the State Bank of Pakistan (SBP) a change in the methodology of deriving the house rent index may also be partly responsible for the observed slowdown in headline inflation.

### Model, data, and estimation sample
- A stylized inflation model is specified including:
  - standard monetary variables (money supply, credit to the private sector),
  - the exchange rate,
  - the wheat support price as a supply-side factor.
- The model is estimated with monthly data for the period January 1998 to June 2005.

### Key empirical findings
- Monetary factors are the main drivers of inflation in Pakistan over the sample period.
  - Monetary factors affected inflation with a lag of about one year.
- The wheat support price affects inflation in the short run.
- The wheat support price matters for inflation over the medium term only if accommodated by monetary policy (i.e., if monetary policy accommodates wheat price increases, medium-term inflationary effects can persist).
- The analysis supports the interpretation that recent inflation acceleration (late 2003–2005) was driven primarily by monetary growth, with short-run contributions from wheat support price increases.

### Implications for policy
- If inflation is primarily monetary, responsibility for achieving price stability rests with the central bank and fiscal authorities.
- Short-run supply shocks from wheat support price increases can raise inflation temporarily, but medium-term inflationary consequences depend on the monetary policy response (accommodation vs. non-accommodation).

*Source: _wp0660 - 1. Inflation and Monetary Growth (PDF), January 1998–June 2005 data and analysis.**

### Section V provides some conclusions.

### _wp0660 - Section V provides some conclusions.

### Basic elements of the model
- Structuralist models emphasize supply-side factors (food prices, administered prices, wages, import prices) as determinants of inflation; monetary developments are given little importance.
- Stylized hybrid “monetarist-structuralist” model used:
  - Open-economy monetary model (short-run form): p& = f(m&, y&, r, v, e)  (presented as (1) ervymfp &&&&&,,,,,= ).
  - Augmented with wheat support price w: (2) wervymfp &&&&&& ,,,,,= .
- Monetarist implications: with constant velocity v, inflation p& results if money growth m& exceeds real GDP growth y&; interest rate r reduces money demand; financial deepening affects velocity.
- Wheat support price can have short-run impact on inflation, and possibly long-run impact on the price level (but not inflation).
- For non-stationary series, equation (2) reflects short-run relationships unless cointegration is present.

### Data and sample
- Sample: January 1998 to June 2005 (monthly).
- Main variables included:
  - CPI: overall consumer price index (“headline inflation”).
  - Monetary variables: Broad money; private sector credit; 6-month treasury bill (T-bill) rate.
  - Activity variables: interpolated real and nominal GDP (12-month moving average of fiscal year GDP); large scale manufacturing index (LSM).
  - Exchange rate: nominal effective exchange rate (NEER).
  - Wheat support price: guaranteed minimum government purchase price.
- Log levels of all variables are nonstationary; most variables integrated of order one; interpolated real and nominal GDP series integrated of order two.
- Seasonality: controlled using 12-month moving averages for growth-rate regressions; monthly dummies and Islamic calendar controls for log-level regressions.

### CPI inflation — short-run ADL findings
- Model estimated as ADL using PcGets with 12 lags; summary coefficient β measures long-run impact after dynamics: β = (1/A(1)) B(1).
- Preferred specifications M3 and M4:
  - M3 explains CPI inflation as a function of broad money growth, real GDP growth, NEER appreciation, and average annual wheat support price change.
  - M4 explains CPI inflation as a function of private sector credit growth, real GDP growth, and average annual wheat support price change.
- Empirical highlights:
  - Monetary factors and the wheat support price are determinants of inflation in the short run.
  - Real GDP growth matters.
  - NEER appreciation has some impact.
  - Monetary growth impacts inflation with a lag of around 12 months.
  - M3 includes a 7 and an 11 month lag of broad money growth.
  - M4 includes 1, 3, 5, 10, and 12 month lags for private sector credit growth.

### Vector Error Correction Model (long-run relationships)
- VECM analysis focused on reduced systems to identify cointegration.
- A meaningful cointegrating relationship exists only for the VECM including private sector credit (credit) but not for broad money.
- Preferred VECM (CPI, Private Sector Credit, Wheat Support Price) with monthly dummies and Islamic calendar controls; reduced system (without real GDP) has cointegrating rank of one.
- Cointegrating vector (equation (6)):
  - cpi =   1.733   + 0.205 * credit  + 0.004 * wheat  + 0.002 * trend
    - t-statistics shown in parentheses indicate wheat support price is not part of the long-run relationship.
- Simplified cointegrating vector after dropping seasonal controls (equation (7)):
  - cpi =   0.994   + 0.263 * credit  + 0.001 * trend
- Interpretation:
  - Wheat support price affects CPI only in the short run, not in the long run.
  - Private sector credit impacts CPI in both the long run and short run.
  - Loading coefficient for CPI equation indicates 23 percent of a deviation from the long-run relationship is adjusted in the next period.
- Impulse response functions (generalized 1-standard deviation impulses):
  - CPI initially falls in response to innovations in private sector credit or the wheat support price (price puzzle), then increases after 2–4 months.
  - Impact of an impulse to private sector credit is more pronounced than to the wheat support price.

### Broad money VECM attempt and interpretation
- No meaningful VECM containing broad money could be identified in the sample despite experiments with systems including CPI, broad money, NEER, real GDP, and wheat support price.
- Likely reason: ongoing changes to money demand and fundamental relationships (nonconstant coefficients) during the sample (1998/99 crisis and reforms); recursive coefficients found to diverge or fluctuate in prior studies.
- De Grauwe and Polan (2005) note quantity theory relationships are hard to identify in countries with inflation less than 10 percent.

### Graphical analysis (wheat support price episodes)
- Three episodes of wheat support price increases: September 1999, September 2003, September 2004.
- Key contrasts in 12 months after increases (broad money and credit growth lagged 12 months):
  - 1999 increase: monetary growth subdued, inflation remained low; slight headline inflation increase in mid-2000 driven by nonfood inflation — wheat support price played little role.
  - 2003 and 2004 increases: monetary growth high and accelerating; triggered acceleration in nonfood inflation and larger acceleration in food inflation — wheat support price may have contributed, but accommodating monetary conditions enabled second-round effects.
- Domestic wheat prices generally follow international prices (Figure 6); pronounced domestic increase after May 2003 started before wheat support price was raised, implying international price influence.

### Why worry about inflation? (impacts and thresholds)
- High and persistent inflation is regressive, erodes savings of the poor, and inhibits optimal resource allocation.
- Nonlinear inflation–growth relationship with thresholds:
  - Khan and Senhadji (2001): threshold 1–3 percent for industrial countries and 7–11 percent in developing countries.
  - Khan (2005) for a Middle East and Central Asian sample including Pakistan: optimum inflation rate 3 percent; keep inflation below 6 percent to avoid negative growth impact.
  - Mubarik (2005) for Pakistan (1973–2000): inflation in excess of 9 percent harms short-run growth.
  - Hussain (2005) for Pakistan: threshold 4–6 percent beyond which inflation harms growth.
- Inflation and financial development:
  - Khan, Senhadji, and Smith (2005): threshold about 3–6 percent (panel of 168 countries); inflation above threshold adversely affects financial development.
- Pakistan historical perspective:
  - 1978–1991: inflation 8 percent on average; real per capita growth averaged 3 percent.
  - 1992–1997: inflation averaged 11 percent; real per capita growth averaged 1 percent.
  - Since 1998: inflation reduced to average 5 percent; real per capita growth recovered.
- Conclusion: SBP’s inflation target of 5 percent is appropriate to avoid double-digit inflation risks and safeguard growth and financial development.

### Summary findings
- Monetary factors determine inflation in Pakistan:
  - Broad money growth and private sector credit growth are key variables explaining inflation with a lag of around 12 months.
  - A long-run relationship exists between CPI and private sector credit.
  - Wheat support price impacts inflation only in the short run, not in the long run.
- Short-run and medium-run dynamics:
  - There is a fairly stable relationship between private sector credit growth and inflation 12 months ahead; similarly for broad money growth.
  - Monetary growth impacts inflation with a lag of around 12 months.
- Concise answer to “money or wheat?”: “money”!

### Policy recommendations and implications
- Overarching objective for the State Bank of Pakistan (SBP): price stability.
- SBP should focus policies to keep inflation close to its target of 5 percent.
- Exchange rate targeting as a nominal anchor is not recommended because it implies adopting the anchor country’s monetary policy, may yield a suboptimal inflation rate, and removes the exchange rate as an instrument to offset external shocks.
- Preference for targeting core inflation:
  - Core inflation (approximated as nonfood, nonenergy or SBP’s trimmed mean) is a better measure of underlying inflation trends than headline inflation.
  - Core inflation is the right target for monetary policy in the medium term, but SBP must also monitor headline inflation due to its immediate household effects and public salience.
- Forward-looking monetary policy:
  - Set policy today with a view to meeting the inflation target around one year from now because current monetary conditions transmit to inflation with about a 12-month lag.
  - Monitor private sector credit growth and broad money growth as leading indicators of inflation 12 months ahead.

*Source: _wp0660 - Section V provides some conclusions; https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp0660.pdf*

### References

### References

### Price puzzle, inflation theory, and monetary perspectives
- Balke, Nathan, and Kenneth Emery, 1994, “Understanding the Price Puzzle” Economic and Financial Policy Review (Fourth Quarter), Federal Reserve Bank of Dallas.
- Bernanke, Ben S., 2005, “Inflation in Latin America—A New Era?” Remarks at the Stanford Institute for Economic Policy Research Economic Summit, February 11, 2005. Available via the Internet at: http://www.federalreserve.gov/boarddocs/speeches/2005/20050211/default.htm.
- De Grauwe, Paul, and Magdalena Polan, 2005, “Is Inflation Always and Everywhere a Monetary Phenomenon?,” Scandinavian Journal of Economics, Vol. 107, No. 2, pp. 239–59.
- Friedman, Milton, 1963, Inflation: Causes and Consequences (New York: Asia Publishing House).
- Taslim, Mohammad Ali, 1982, “Inflation in Bangladesh: A Reexamination of the Structuralist—Monetarist Controversy,” in: The Bangladesh Development Studies, Vol. 10, pp. 23–52.

### Country studies and applied inflation analyses
- Choudhri, Ehsan U., and Mohsin S. Khan, 2002, “The Exchange Rate and Consumer Prices in Pakistan: Is Rupee Devaluation Inflationary?” The Pakistan Development Review, Vol. 41, No. 2, pp. 107–20.
- Domaç, Ilker, 2004, “Explaining and Forecasting Inflation in Turkey,” World Bank Policy Research Working Paper 3287. Available via the Internet at: http://wdsbeta.worldbank.org/external/default/WDSContentServer/IW3P/IB/2004/05/13/000012009_20040513152643/Rendered/PDF/wps3287.pdf.
- Noyola, Juan, 1956, “El Desarrollo Económico y la Inflación en México y otros Países Latinoamericanos,” Investigación Económica, Vol. XVI, No. 4.
- Sunkel, Osvaldo, 1958, “Inflation in Chile: An Unorthodox Approach,” International Economic Papers, No. 10, 1960.
- Sherani, Sakib, 2005, “The Dark Side of the Force,” ABN-AMRO, Economic Focus—Pakistan, Monday, May 30, 2005.
- van Rooden, Ron, 2005, “Is Pakistan’s Growth Acceleration Sustainable?”, International Monetary Fund, Pakistan–Selected Issues and Statistical Appendix, IMF Country Report No. 05/408 Available via the Internet at: http://www.imf.org/external/country/PAK/index.htm.

### Pakistan-specific studies and working papers
- Bokil, Madhavi, and Axel Schimmelpfennig, 2005, “Three Attempts at Inflation Forecasting in Pakistan,”International Monetary Fund Working Paper 05/105. Available via the Internet at: http://www.imf.org/external/pubs/ft/wp/2005/wp05105.pdf.
- Hyder, Zulfiqar, and Sardar Shah, 2004, “Exchange Rate Pass-Through to Domestic Prices in Pakistan,” State Bank of Pakistan Working Papers No. 5. Available via the Internet at: http://www.sbp.org.pk/publications/wpapers/wp05.pdf.
- Hussain, Manzoor, 2005, “Inflation and Growth: Estimation of Threshold Point for Pakistan,” in Pakistan Business Review, October.
- Khan, Ashfaque H., and Mohammad Ali Qasim, 1996, “Inflation in Pakistan Revisited,” in The Pakistan Development Review, Vol. 35, No. 4, Part II, pp. 747–59.
- Mubarik, Yasir Ali, 2005, “Inflation and Growth: An Estimate of the Threshold Level of Inflation in Pakistan,” SBP-Research Bulletin, Vol. 1, No. 1, pp. 35–44.
- Riazuddin, Riaz, and Mahmood-ul-Hasan Khan, 2005, “Detection and Forecasting of Islamic Calendar Effects in Time Series Data,” SBP-Research Bulletin, Vol. 1, No. 1, pp. 25–34.
- Khan, Mohsin, 2005, “Inflation and Growth in MCD Countries,” Mimeo. International Monetary Fund.

### Inflation, growth, and thresholds; financial development
- Khan, Mohsin S. and Abdelhak S. Senhadji, 2001, “Threshold Effects in the Relationship between Inflation and Growth,” IMF Staff Papers, Vol. 48, No. 1, pp. 1–21.
- Khan, Mohsin S., Abdelhak S. Senhadji, and Bruce D. Smith, 2005, “Inflation and Financial Depth,” in Macroeconomic Dynamics, forthcoming.
- Loayza, Norman, and Romain Ranciere, 2005, “Financial Development, Financial Fragility, and Growth,” International Monetary Fund Working Paper 05/170. Available via the Internet at: http://www.imf.org/external/pubs/ft/wp/2005/wp05170.pdf.
- Mohanty, M.S. and Marc Klau, 2001, “What Determines Inflation in Emerging Market Economies?”, Bank for International Settlement Papers No. 8. Available via the Internet at: http://www.bis.org/publ/bispap08a.pdf.

### Econometric methods, VARs, impulse responses, and unit root/cointegration testing
- Brissmiss, Sophocles, and Nicholas Magginas, 2004, “Forward-Looking Information in VAR Models and the Price Puzzle,” Bank of Greece Working Paper No. 10 (February).
- Hendry, David F., and Hans-Martin Krolzig, 2004, We Ran One Regression, (Oxford: Oxford University). Available via the Internet at http://www.nuff.ox.ac.uk/economics/papers/2004/w17/OneReg.pdf.
- MacKinnon, James G., 1996, “Numerical Distribution Functions for United Root and Cointegration Tests,” Journal of Applied Econometrics, Vol. 11, No. 6, pp. 601–18.
- MacKinnon, James G., Alfred A. Haug, and Leo Michelis, 1999, “Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration,” Journal of Applied Econometrics, Vol. 14, No. 5, pp. 563–77.
- Pesaran, Hashem M., and Yongcheoi Shin, 1998, “Generalized Impulse Response Analysis in Linear Multivariate Models,” Economic Letters, Vol. 58, No. 1, pp. 17–29.

*Source: _wp0660 - References*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp0660.pdf_