INDUS INSTITUTE OF HIGHER EDUCATION KARACHI

Impact of inflation on economic growth :an overview on Pakistan

[FINANCE T E!I!"
[IQRA IRSHAD] [B.B.A :08-A]

SUPERVISED BY : SIR NAWAZ AHMED

Turnitin Originality Report

Impact of inflation on economic growth: an overview on Pakistan By Iqra Irshad (ID- 5-2008 BBA-08A)

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66666666666666 Nawa9 Ahme$ Thesis !1pervisor II E

66666666666666666666 :sman Ali ;, <1siness A$ministration

Faculty of business a ministration

I!"#$ I!$TIT#T% OF &I'&%R %"#()TIO! *arachi

(%RTIFI()T%
I am pleased to certify that Ms Iqra Irshad D/o Mohammad Irshad has satisfactorily carried out a research or!" u#der my super$isio# o# the topic of

%impact of inflation on economic growth:an overview on pakistan+ I further certify that her disti#cti$e ori&i#al research a#d her thesis is orthy of

prese#tato# to the faculty of ma#a&eme#t scie#ces" I'D() I')*I*(*+ ,.I/.+0 +D(1A*I,' 2arachi for the de&ree of B3B3A (-I'A'1+)3

$#P%R,I$OR:

-------------------------

)(*!O./%"'%0%!T
I ould li!e to tha#! 0r !awa1 )hme 4 my super$isor ho has &i$e# me

Ma#y useful comme#ts related to my topic3 After his &uide#ce I am a5le to complete my thesis throu&h his step 5y step support for my research or!3Also I ould li!e to tha#!s to Mr 6a$ed Iq5al ho chec!ed my or! o# short term #otice a#d appreciat my or! 5y 5oth of perso#s also a lot of detailed a#d $alua5le comme#ts o# this thesis3 *he same appreciatio#s ill 5e for mem5ers from my thesis &roup a#d for the teacher a#d mem5ers from my &roups i# course3

"%"I()TIO!
This thesis is dedicated to my parents who introduced me to the joy of reading from birth enabling such a study to take place today.

TAB E OF CONTENTS

)bstract222222222222222222222+ 3 $%(TIO! 4+ I#troductio#77777777777777777773 8 5+ 9iterature0e$ie 777777777777777773 :; 5+4 empirical re$ie 777777777777777773:5 6+ .ypothesis777777777777777777733 <0 7+ =aria5les7777777777777777777733<0 3+ Model a#d frame or!777777777777777 <0 8+ Methodolo&y77777777777777777733 <: 8+4 model specificatio# a#d estimatio# tech#ique7777733 << 9+ 0esults a#d discussio#s7777777777777733 <5 9+4 Data a#d summary output77777777777733333 <8 :+ 1o#clusio#s 773777777777777777733 3<8 T);/%$ R%F%R%!(%$ 7777777777777777773 ;0 )PP%!"I<777777777777777777773 ;<

);$TR)(T
*he thesis is to fi#d out the impact of i#flatio# o# eco#omic &ro th i# >a!ista# 5y usi#& the data from :?50 to 20:03 *his thesis uses the re&ressio# li#ear model to fi#d out the impact o# &dp &ro th3 *his study is 5asis o# ma#@oor hussai# ho"s fi#di#&s are i#si&#ifica#t a#d also similar to si#&h (200<) hich recomma#ds that the risi#& prices ithi# ; to 8 A is fa$ora5le for pa!ista# a#d ce#tral 5a#! should !eep the policies fa$ora5le for the &ro th3 As my fi#di#&sB are i#si&#ifica#t that there is #o impact of i#flatio# o# eco#omic &ro th3

&

I!TRO"#(TIO!C
9ast ma#y year research or! o# eco#omics has descri5ed ma#y reaso#s of

relatio#ship 5et ee# risi#& price a#d eco#omic i#crease3 ,#e maDor purpose of this research i#crease &et the or! after ide#tify the risi#& price is 5ad thi#& to eco#omic ee! poi#ts or effected poi#ts3 )ome research defi#e a threshold

rate of risi#& price a5o$e the eco#omic i#crease is #e&ati$e a#d si&#ifica#t due to risi#& price effects" hile the positi$e le$el of eco#omics i#crease is 5elo le$el

of threshold rate of risi#& price3 +$e# so" as the importa#t results 5y the pre$ious research or! o# ma#y he# the

differe#t purposes across the cou#tries these results are sho s that

risi#& price is effect o# eco#omic i#crease there is #o &e#eral a&reeme#t o$er the poi#t3 *his docume#t descri5ed the maDor poi#t is that usi#& a re&ressi#& formula there is ma#y possi5le reaso#s a$aila5le of i#flatio#ary effects o# the relatio#ship 5et ee# eco#omic i#crease a#d fi#a#cial sector de$elopme#t3 I# &e#eral macroeco#omics holds that to promote eco#omic i#crease the com5i#atio# of lo risi#& price a#d fi#a#cial de$elopme#t is a commo# factor ithout this

com5i#atio#

e ca##ot promote eco#omic i#crease3 *he i#teresti#& a#d de5ate

article is the questio# of #ature co##ectio# 5et ee# fi#a#cial de$elopme#t" eco#omic i#crease a#d risi#& price3 *his is also true that this topic a#d the =

relatio#ship 5et ee# these three $aria5les is already usi#& i# de5ates a#d research poi#t of $ie 3 I# 9ar&e &e#eral a&reeme#ts a5out co##ects of these three $aria5les eco#omic i#crease" risi#& price a#d fi#a#cial de$elopme#t has 5ee# reached3 1ommo#ly the co#cept of lo#& term a#d medium term reactio# of risi#& price" product i#crease a#d reduci#& i#$estme#t o# eco#omic i#crease is #e&ati$e3 *he maDor aim of policyma!ers is lo rate of risi#& price if risi#& price is a mai# 5loc!a&e of promoti#& eco#omic i#crease" +$e# so risi#& price isE .o risi#& price lo hat is the tar&et le$el of

le$el is positi$e impact o# fi#a#cial ay it is possi5le to o5tai#

de$elopme#t a#d o# eco#omic i#creaseE I# the other

the threshold le$el of risi#& price poi#t if a #o#-li#ear relatio#ship fou#d 5et ee# risi#& price a#d eco#omic i#crease" a#d risi#& price a#d eco#omic i#crease hat is the si&# of relatio#ship 5et ee# as first ide#tified

ould co#trolled3 -ischer

the #o#-li#ear relatio#ship" he fou#d that at lo le$el of risi#& price rate the lo#& term relatio#ship 5et ee# risi#& price F eco#omic i#crease is positi$e" a#d at hi&h le$el of risi#& price rate it 5ecome #e&ati$e3 Accordi#&ly the $ery deep study a5out the #o# li#ear eco#omic i#crease a#d risi#& price" there are ma#y possi5ilities a#d factors that eGplai# the eGiste#ce of risi#& price threshold effects o# the relatio#ship 5et ee# eco#omic i#crease a#d fi#a#cial de$elopme#t" #o adays the deep study a#d theoretical research a5out relatio#ship of eco#omic i#crease a#d risi#& price su&&ests that promoti#& the eco#omic i#crease the fi#a#cial mar!et playi#& a# importa#t role3 *hus e ca#

say that fi#a#cial mar!et acti$ity &oes do # a#d up if cha#&es i# the rate of risi#& price" it is possi5le that some cha#&es ould ha$e lo#& term real acti$ities

implicatio#3 Moreo$er these theoretical studies pro$ide stro#& e$ide#ce to pro$e that fi#a#cial de$elopme#ts promote eco#omic i#crease u#der the moderate a#d lo rate of risi#& price3 1ausality test tells the relatio#ship a5out risi#& price a#d eco#omic i#crease causality3 Accordi#& to ,!uya# a#d +r5ay!al there is casualty fou#d i# relatio#ship of risi#& price to eco#omic i#crease a#d also tells there is #o causality co##ectio# fou#d 5et ee# eco#omic i#crease a#d risi#& price3 ,# the opposite i# #ature" fi#a#cial de$elopme#t dose #o produced a#y type of effect o# eco#omic i#crease u#der hi&h risi#& price e#$iro#me#t3 *he 5asic reaso# of this situatio# is that i# a risi#& price e#$iro#me#ts i#$estme#t proDect i#formatio# flo a#d i#termediates retur#s 5ei#& used 5ecome less readily

a$aila5le a#d u#sure of himself a#d his future3 )uppress a #asce#t uprisi#& eco#omic de$elopme#t due to i#formatio# costs a#d risi#& price i#creases tra#sactio#s3 .i&h risi#& price co#ditio#s ca# put out of o#eHs co#scious#ess fi#a#cial i#termediatio# 5y &ri#di#& somethi#& do # the u#importa#t of mo#ey assets a#d policy decisio#s 5ecome a cause distort the fi#a#cial structure3 *he follo i#& accepted customs a#d proprieties $ie i# microeco#omics holds

that cha#&es i# the rate of risi#& price 5y #ature3 *hese cha#&es i# the lo#& terms do #ot affect real acti$ity3 +$e# so the eGpert $ie of solutio# terms that e$e# i#

the lo#& term period the risi#& price hi&h rates ca# ha$e made a place for themsel$es u#der the most u#to ard co#ditio#s for real eco#omic i#crease3 I#

#%

these days the maDor topic amo#&st eco#omists is that the pro5lem of a&&re&ate eco#omic performa#ce a#d some i#di$iduals is hi&h rates of risi#& price3 +$e# so there is a $ery fe &e#eral a&reeme#ts a5out the characteri@ed 5y perfect

co#formity to fact or truth 5et ee# relatio#ship eco#omic i#crease performa#ce a#d risi#& price a#d 5y the method i# hich risi#& price effects o# eco#omic

i#crease3 *he effects of lo#& term acti$ity i#crease i# risi#& price rates is $ery alarmi#& poi#t3 *he &e#eral a&reeme#t a5out the a# opposi#& directio# effects of risi#& price o# real eco#omic i#crease sho o#ly a some part of the complete

picture3 I# some pre$ious researches has focused o# the #o#-li#ear relatio#ship 5et ee# risi#& price a#d eco#omic i#crease3 *he first co#ditio# is at lo er rate of risi#& price i# this co#ditio# the relatio#ship is #ot importa#t i# effect or e$e# positi$e o# eco#omic i#crease 5ut at hi&her rates of risi#& price has importa#t #e&ati$e effect o# eco#omic i#crease3

##

.hat level of inflation is harmful to growth=

Theory Basically eco#omic research theories results 5ased o# a5out the outputs of eco#omic i#crease to risi#& price3 *hese eco#omic theories are $ery useful 5ecause the co#cept of these theories 5ased o# o5ser$ed hypothesis3 .istorically i# the missi#& ord mea#i#& of term %1o#ti#ually recurri#& to the risi#& pricesI ere 5uilt o#

the early researches a5out the risi#& price a#d eco#omic i#crease

cyclical results" co#ti#ually recurri#& to the risi#& prices is re&arded as a post orld ar 2 reaso#i#&3 I# ad$a#ce of the#" risi#& price rou#ds ere follo ed 5y

tur# of deflatio#s3 0isi#& price act li!e a la@y do& that is #ot doi#& a#ythi#& li!e up ard le$el a#d do # ard le$el tre#d3 *he risi#& price le$el doi#& #othi#& 5ut it is sta5le i# a eGceptio#al le$el u#less a#d u#til there is a#y pertur5atio#3 *he#ceforth" the risi#& price mo$es to a#other le$el at hich risi#& price

determi#es3 *heory" thus 5ei#& searched for accou#t a positi$e correlatio# positio# 5et ee# risi#& price a#d eco#omic i#crease3 *he a&&re&ati$e supply a#d a&&re&ati$e requireme#t model also tells that positi$e 5eha$ior of risi#& price a#d eco#omic i#crease" here the risi#& price effects o# eco#omic i#crease a#d

eco#omic i#crease is i#creased3 +$e# so" i# the :?J0s the co#cept of sta&flatio# rise hump a#d the credi5ility" of the positi$e co##ectio# #) as questio#ed3 At that

time >hillips 1ur$e relatio#ship appeared a#d idely accepted3 I# this reaso# the rate of risi#& price $ery hi&h le$el a#d also the >hillips 1ur$e relatio#ship is a clue of lo a#d #e&ati$e output eco#omic i#crease3 I# this docume#t the comi#& after su5-sectio#s e spe#d some time classic

+#do&e#ous i#creme#t possi5ilities" 'eo-classical" Mo#etarist" 'eo-2ey#esia# a#d 2ey#esia#" e$ery compo#e#t playi#& a# importa#t role to the eco#omic i#crease a#d risi#& price relatio#ship3 1lassic eco#omics recollect supply side possi5ilities if the #atio#Ks eco#omy is to &ro the supply side theories

u#derscore the #eed for 5o#uses to sa$e a#d de$ote" Doi#ed to the la#d capital a#d eGertio#s3 (#der the Ad-A) frame or! the 'eo-!ey#esia# a#d 2ey#esia# theory &i$e some importa#t a#d 5it 5y 5it frame or! for li#!i#& risi#& price a#d eco#omic i#crease3 Mo#etarism eGplai# the Lua#tity possi5ilities" a#d playi#& i# importa#t role of pecu#iary i#crease i# characteri@i#& risi#& price" +#do&e#ic F 'eo-classical i#creme#t theories searched for the effects of risi#& price o# eco#omic i#crease throu&h its 5eha$ior o# capital collectio# a#d i#$estme#t3 *his research is prese#t the importa#t a#d useful differe#ce amo#& the solutio#s of theoretical studies" i# the differe#t cou#tries the ratio# of risi#& price o# eco#omic i#crease is differe#t3 +$e# so" some theoretical results hich sho as quite lar&e

some results a5out the threshold rate of risi#& price accordi#& some importa#t results useful result a5out

differe#t cou#tries3 -or eGample i# I#dia Mr3 )i#&h sho

o# threshold le$el of risi#& price a#d Mr3 Mu5ari! sho #2

threshold le$el of risi#& price i# >a!ista# a#d he also said the threshold le$el of risi#& price is ? perce#t i# >a!ista#3 )ome other researches a5out threshold le$el of risi#& price for 5oth types of cou#tries li!e &ro i#& a#d de$eloped3 +$e# so" )e#hadDiKs a#d 2ha# Mor!s o# threshold le$el of risi#& price for 5oth types of cou#tries li!e &ro i#& a#d de$eloped3 *hey said threshold le$el ra#&e J-:: perce#t for the &ro i#& cou#tries i#cludi#& >a!ista#3 Di#& Giao fi#d that co#i#te&ratio# frame or! e#closi#& correlatio# matriG a#d &ra#&er casualty test tell the situatio# of relatio#ship 5et ee# risi#& price a#d eco#omic i#crease3 *he risi#& price results sho positi$ely o# eco#omic i#crease relatio#ship i# the lo#& term period3 0isi#& prices is importa#tly correlated utili@i#& the eco#omic i#crease rate3 *he simple re&ressio#s pa#el i#dicates or descri5ed the relatio#ship 5et ee# three $aria5les risi#& price u#e$e##ess eco#omic i#crease a#d risi#& price3 'o possi5le it is

ith the help of i#creme#t accou#ti#& model to spot that mai# &roo$es

throu&h hich risi#& price comes do # eco#omic i#crease3(fischer)3 Accordi#& to (lee a#d Mo#&) that risi#& price threshold occurs i# the co##ectio# 5et ee# fi#a#cial De$elopme#t a#d i#creme#t3 'o e ca# say that some

cha#&i#& i# the risi#& price directly effect o# the co##ectio# 5et ee# t o $aria5les fi#a#cial de$elopme#t a#d i#creme#t3 1o#seque#tly" &eomorpholo&ic up&rade i# risi#& price threshold le$el should 5e ta!e# he# co#structi#& a#d predictio# models of eco#omic i#crease3

#/

>a!ista# for the period :?J<-2005 descri5es the threshold le$el of risi#& price i# >a!ista#3 I# the e#d of this sur$ey the rite fi#ds that there is #o a#y threshold

le$el of risi#& price i# >a!ista#3 Mu5ari! (2005) is the mai# perso# (director) to fi#d ? perce#t of risi#& price threshold le$el i# >a!ista# a#d all other solutio#s3 *his study also sho s that there is 5 perce#t co#tempora#eous risi#& price is fou#d i# >a!ista# that is a positi$e impact o# eco#omic i#crease3 -urther study sho s that the impacts of co#tempora#eous risi#& price o# eco#omic i#crease is &ood 5ut also sho some i#si&#ifica#ts3 After discuss all the requireme#ts a#d e easily say that the

fu#dame#t of the i#fere#ce reaped from the sur$ey

accepta5le ra#&e of the risi#& price i# >a!ista# ;-8A this ra#& of risi#& price is helpful for mai#tai# eco#omic i#crease3 )imilar idea descri5ed i# I#dia 5y )i#&h i# 200< that the tar&et risi#& price ra#&e is ;-JA suita5le i# I#dia for eco#omic i#crease3 I# >a!ista# the risi#& price is the su5Dect of supply a#d dema#d shoc!s3 I# >a!ista# 1e#tral Ba#! of >a!ista# should !eep the risi#& price i# ra#&3

#.

/ITR)T#R% R%,I%.
>ing <iao Accordi#& to 6i#& Giao the relatio#ship 5et ee# eco#omic i#creases a#d risi#& prices of chi#a3 >re$ious literature ca##ot o5tai# a#y u#am5i&uous solutio# o# these pro5lems3 *his research report ill mista!e rectificatio# a#d employ co#-

i#te&ratio# models attachi#& &ra#&er causality test a#d correlatio# matriG eGami#e the eco#omic &ro th a#d risi#& prices relatio#ship3 *his i#formatio# is a##ual time series from :?J8 to 200J of chi#a3 *he lo#& ru# risi#& prices solutio#s sho positi$ely relate to eco#omic i#crease relatio#ship3 Mhe# chi#a

de$elops eco#omy they must pay atte#tio# to price le$el3 *he cause of risi#& prices i# the short ru# period ould 5e hi&h speed i#crease of i#$estme#t3 Raghben ra >ha an Tu "ang Accordi#& to a##ual i#formatio# of eco#omic i#crease a#d risi#& price $aria5ility e see the results o# 5oth &ro i#& a#d moder#i@ed cou#tries3 *he

i#formatio# of :?8:-200? period co$er <: moder#i@ed cou#tries a#d :82

#*

&ro i#& cou#tries3 Me o5tai# the follo i#& solutio# 5y fi$e year coefficie#t of $ariatio# of risi#& prices I# &ro i#& cou#tries price $aria5ility has sho e su&&est accordi#& to si&#ifica#t e$ide#ce that risi#& a #e&ati$e impressio# o# eco#omic i#crease he# the

rate of risi#& price surpasses :0 perce#t3 I# moder#i@ed cou#tries the i#crease of risi#& price is u#der co#trol there is #o a#y e$ide#ce to i#crease risi#& price3

)le?an er ;ick
*his research paper descri5ed the relatio# 5et ee# risi#& price a#d eco#omic i#crease co#firms that the left out $aria5le dia&o#al of recei$ed dialo& models ca# 5e eco#omically si&#ifica#t a#d statistically3 *his importa#t i#$esti&atio# sho s the result accordi#& to a5stractio# of .a#se#Ks (:???) dialo& 5oG tolera#ce simulatio# that the relatio#ship 5et ee# risi#& price a#d eco#omic i#crease for &ro i#& cou#tries3 Doorstep ideas a#d 0e&ressio# slop 5oth are discussed a#d these readily a$aila5le for re&ressors the possi5le preDudice of eGcludi#& a#d authorities i#tercepts3 @asir )li 0ubarik Accordi#& to a##ual i#formatio# from :?J< to 2000 e discuss the le$el of

risi#& prices i# Mest >a!ista# (la !ha# a#d se#hadDi 200:)3 After discuss all the co#ditio#s a#d requireme#ts of threshold model a#d fi#ally its predispositio# results usi#& i#formatio# of risi#& prices a#d eco#omic i#crease of home cou#try a#d after study e &et follo i#& maDor poi#ts3 Me ca# defi#e causality directio#s #&

from risi#& prices to eco#omic i#crease a#d #ot other

ay arou#d

after

causality test3 *he red alert eco#omic i#crease is raisi#& prices a#d threshold model a#aly@e ? perce#t recomme#ds threshold risi#& prices le$el for eco#omic i#crease3 *he po erful solutio#s" o5tai# form i#dicates eGact le$el of threshold risi#& prices a#d $alidity of the model" this deeply research study i#dicates that the mai# reaso# of eco#omic i#crease is risi#& prices le$el 5elo ? perce#t3

*hese results mi&ht 5e pro$idi#& 5est results i# determi#i#& a# optimal risi#& price tar&et3 All the same" these results does #ot i#dicate that eco#omic i#crease is lo the le$el of risi#& prices3 %rman %rbaykal an &+ )y An Okuya I# this sur$ey docume#t riter defi#es *ur!ey a#aly@e i# our cou#try the

relatio#ship 5et ee# eco#omic i#crease a#d risi#& price i# the periods of :?8J a#d 20083 I# 5oth periods tur!ey a#aly@e ith the help of Bou#d *est de$eloped

>asara# et al3 (200:) these test sho the results of lo#& term relatio#ship 5et ee# these t o compo#e#ts eco#omic i#crease a#d risi#& price a#d comi#& after the test result relatio#ship 5et ee# t o ro s of the macrocosm of co-i#te&ratio# colla5oratio#3 *here is #o a#y result fou#d a5out #umerical si&#ifica#t lo#& term relatio#ship ith formed A0D9 models a#d there is also short term #umerical

si&#ifica#t relatio#ship a#d #e&ati$e results fou#d3 1ausality test represe#t the causality relatio#ship 5et ee# t o ro s3 Accordi#& to 1ausality test there is #o causality relatio#ship fou#d 5et ee# eco#omic i#creases to risi#& price if causality relatio#ship fou#d it has 5ee# raisi#& price to eco#omic i#crease3

#=

0onaheng $eleteng *his sur$ey tries to eGplai# accordi#& to quarterly time-series i#formatio# for the periods :?8: to 200; that risi#& prices optimal le$els perform the mai# role for eco#omic i#crease i# 9esotho" e ca# easily co#$erted all a##ual i#formatio# to

quarterly time-series i#formatio# 5y usi#& *hree dime#sio#al i#terpolatio# tech#ique e#&rafted i# +$ie s eco#ometric soft are 3 *hese quarterly time series i#formatio# sho :0 perce#t optimum amou#t of risi#& price 5ased o#

risi#& price is detrime#tal for eco#omic i#crease3 Accordi#& to this result a#y risi#& price rate a5o$e this optimum le$el 5ecome a reaso# of eco#omic i#crease3 0an1oor &ussain I# this docume#t riter tries to eGplai# the primary thi#& is that to usi#& a##ual

i#formatio# of >a!ista# for the period :?J<-2005 descri5es the threshold le$el of risi#& price i# >a!ista#3 I# the e#d of this sur$ey the rite fi#ds that there is #o

a#y threshold le$el of risi#& price i# >a!ista#3 Mu5ari! (2005) is the mai# perso# (director) to fi#d ? perce#t of risi#& price threshold le$el i# >a!ista# a#d all other solutio#s3 *his study also sho s that there is 5 perce#t co#tempora#eous risi#& price is fou#d i# >a!ista# that is a positi$e impact o# eco#omic i#crease3 -urther study sho s that the impacts of co#tempora#eous risi#& price o# eco#omic i#crease is &ood 5ut also sho some i#si&#ifica#ts3 After discuss all the e easily

requireme#ts a#d fu#dame#t of the i#fere#ce reaped from the sur$ey

say that the accepta5le ra#&e of the risi#& price i# >a!ista# ;-8A this ra#& of risi#& price is helpful for mai#tai# eco#omic i#crease3 )imilar idea descri5ed i# #-

I#dia 5y )i#&h i# 200< that the tar&et risi#& price ra#&e is ;-JA suita5le i# I#dia for eco#omic i#crease3 I# >a!ista# the risi#& price is the su5Dect of supply a#d dema#d shoc!s3 I# >a!ista# 1e#tral Ba#! of >a!ista# should !eep the risi#& price i# ra#&3

"avi "rukker I# this sur$ey riter descri5ed a questio# is %super-#eutrality of mo#eyI3 A

curre#tly theoretical solutio# prese#ts threshold model alter#ates of super#eutrality3the theoretical solutio# sho that the threshold le$el of risi#& price

more tha# the effect of risi#& price o# lo#& term i#crease cha#&es3 Me use #e eco#omic methods to o5tai# the solutio# a#d some other results i# #o#-dy#amic" pa#el-i#formatio# model a#d fiGed-effects that ha$e threshold effects3 *he solutio# descri5es that risi#& price has a #o#li#ear effects o# eco#omic i#crease3 ,ur solutio# a#d theoretical or! i# hich descri5es that risi#& price effects o#

eco#omic i#crease3 *he coefficie#t si&# o# i#$estme#t is differe#ce 5et ee# the i#dustriali@ed a#d #o#-i#dustriali@ed su5samples" a#d the coefficie#t o# ope##ess has a positi$e si&# are pro$ide i#teresti#& solutio#s3 I# the future research our aim e applyi#& threshold tech#iques ill causes the

estimate co-efficie#t o# ope##ess to a&ree ith sta#dard hypothesis3 'iriBasankar 0alik an )nis (how hury+ )%

I# this importa#t research docume#t" the authors usi#& a##ual i#formatio# t o descri5es the relatio#ship 5oth lo#& term a#d short term dy#amics of the risi#& price a#d eco#omic i#crease of four )outh Asia# 1ou#tries3 I# this docume#t the authors used error correctio# a#d co-i#te&ratio# models to eGplai# the lo#& term a#d short term relatio#ship of eco#omic i#crease a#d risi#& price3 I# this research the mai# o5Decti$e of the docume#t is to a#aly@e the relatio# 5et ee# eco#omic i#crease a#d risi#& price if there is a#y relatio# 5et ee# these t o $aria5les" itKs 5y #ature a#d #o other reaso# for this relatio# eGit3 After study all importa#t a#d useful requireme#ts authors are fou#d t o mai# results a5out eco#omic i#crease a#d risi#& price" :3 *he relatio#ship 5et ee# risi#& price a#d eco#omic i#crease are positi$ely related3 23 *he 1ha#&i#& i# &ro th rates after cha#&i#& i# i#flatio# is 5i&&er tha# that i#crease to cha#&es i# risi#& price rates3 *hese results descri5e some importa#t poi#ts a#d these poi#ts ha$e importa#t policy implicatio#s3 *he helpful ad$ice to reduce eco#omic &ro th our mai# a#d $ery importa#t step is attempts to reduce risi#& price to a $ery lo le$el3 +$e# so" e ca# easily

attempts to achie$e faster eco#omic &ro th may 5e the i#flatio# rate are 5ecomes u#sta5le3 *hus" these poi#ts a#d ups a#d do #s are o# a !#ife-ed&e3i# this docume#t the mai# challe#&e for the authors is to search a &ro th rate le$el hich is sta5le risi#& price rate co#ti#uously if authors ca#Kt fi#d the le$el of eco#omic &ro th tha# first 5eat i#flatio# the# co#trol the faster eco#omic &ro th rate le$els3 *he 5asic thi#& of eco#omic i#crease is risi#& price a#d as per ruled 5y Bru#o a#d +asterly (:??8) this is $ery tou&h co#ditio# that the eco#omic &ro th rate may speed the risi#& price rate a#d ta!e it do #3

)#

$hamim )hme an 0 + 'olam 0orta1a *his research paper eGplores the prese#t co#ditio# 5et ee# risi#& price a#d eco#omic i#crease i# Ba#&ladesh3 )ome 5asic assessme#t has 5ee# adopti#& throu&hout the error correlatio# a#d co-i#te&ratio# models3 -urther more i# this paper eGplai# the eco#omyKs threshold le$el of risi#& price a#d eGplores a# i#teresti#& policy issue a5out eco#omyKs threshold le$el of risi#& price3 *he deep study clues poi#ti#& that there is a #e&ati$e lo#& term statistical importa#ce relatio#ship for a cou#try 5et ee# risi#& price $alue a#d eco#omic i#crease a#d also i#dicates #e&ati$e alo#& term relatio#ship statistically importa#ce 5et ee# 1,')(M+0 >0I1+ I'D+N a#d real /0,)) D,M+)*I1 >0,D(1*3 Authors ha$e me#tio#ed i# this paper a5out situatio# of risi#& price $alue a#d eco#omic i#crease i# Ba#&ladesh i# late :??0s a#d they said Ba#&ladesh as

already o# the tur#i#& poi#t (from positi$e to #e&ati$e) of risi#& price $alue a#d eco#omic i#crease relatio#ship3 Authors also defi#e the le$el of threshold if risi#& price i#creases this le$el tha# affect o# eco#omic i#crease a#d the recomme#ded 8 perce#t threshold le$el of risi#& price3 *hese solutio#s sho some importa#t policy that applies o# 5oth de$elopme#t

cooperators a#d domestic policy ma!ers3 *he first thi#& a5out these policy that that risi#& price rate is #ot listed i# the salaries a#d a&es3 *he risi#& price ill

effect o# 5uyi#& force a#d a# impro$e cost of li$i#&3 )eco#d thi#& is that cou#try co#ti#uously perform tas!s to 5ala#ce the credit requireme#ts 5y the pri$ate a#d pu5lic sectors a&ai#st 5oth 5ala#ce of payme#ts pressures a#d i#flatio#ary3 ))

Accordi#& to co#tractio#ary mo#etary policy :: it is #ot al ays possi5le to mo#etary authority to maGimi@e the #omi#ated i#terest rate a5o$e the eGpected risi#& price rate3 *hat is ay the mo#etary authority is or! to reduce risi#&

price usi#& a# alter#ati$e methods a#d procedures3 )ome poi#ts are i# order3 -or +Gample i# this co#teGt of Ba#&ladesh" the solutio# pro$ided i# this docume#ts do #ot address the follo i#& importa#t issues3 :3 It is #ot possi5le to say that ho results a#d the rate ,f risi#& price rises3 But the risi#& price remai#s ithi# the threshold le$el3 23 *he &reater risi#& price u#certai#ty cause is hi&her risi#& price a#d hat is the relatio#ship 5et ee# risi#& price u#certai#ty a#d risi#& price3 <3 Mhether risi#& price directly or i#directly i#$ol$es i# eco#omic i#crease3 ;3 Mhat is the mai# purpose of hi&h i#flatio#ary pressureE ,ikesh 'okal an $ubrina &anif Accordi#& to /o!al a#d )u5ri#a the mai# purpose of the docume#t as to the eco#omic i#crease rate ill sho the

eGplai# the 5asic a#d si&#ifica#t relatio#ship 5et ee# risi#& price a#d eco#omic i#crease3 Accordi#& to deeply study a5out risi#& price a#d eco#omic i#crease a#d hypothesi@es" the sur$ey sho some useful a#d $ery importa#t

percepti$e#ess 5eha$e of risi#& price F eco#omic i#crease li!e ma&#itude3 I# )2

Michael report he fou#d after 8 perce#t structural 5rea! risi#& price 5adly affected o# i#creme#t3 2ha# F se#dadi fou#d that threshold risi#& price le$el for de$elopi#& cou#tries are ::-:2 perce#t a#d for i#dustrial cou#tries at :-< perce#t3 *hese results playi#& importa#t role to fiG the mai# 5e#efit of mai#tai# risi#& price sta5le a#d supply a useful pe#etratio# i#to the relatio#ship 5et ee# t o compo#e#ts3 9oo!i#& specifically risi#& price performa#ce 5et ee# the t o $aria5les is #ot surprisi#& u#der the hea$y duty li#!" &i$e# the i#flue#ce risi#& price curre#t topical cream co#structio# of the eco#omic system a#d factors3 'e&ati$e ea! li#! sho s o#ly correlatio# co-efficie#t a#d operate from

eco#omic i#crease to risi#& price sho s causality3 Accordi#& to some other sur$eys to importa#ce of mai#tai# lo risi#& price

pro$ide some importa#t poi#ts for -iDi policyma!ers i# order to foster hi&her eco#omic i#crease3 (hienC(hiang /ee an $wee @oong .ong Accordi#& to .uy5e#s a#d smith" /ylfaso# a#d .er5ertsso# a#d Bose risi#& price ill effect o# fi#a#cial mar!et throu&h real eco#omic acti$ities3 )ame

results are produce for America# cou#tries 5y /re&orior a#d /uidotti3 Mhe# America# cou#tries faced i# :?J0s a#d :?80s hi&h risi#& price rate" fi#a#cial de$elopme#t retarded eco#omic i#crease3 *he mai# purpose of this study i#$esti&ates the relatio#ship of three $aria5les for 6apa# F *ai a# a#d these three $aria5les are raisi#& price" fi#a#cial de$elopme#t a#d eco#omic i#crease3 *o ard i#$esti&ate the relatio#ship of these three $aria5les" to i#$esti&ate the )/

effects of possi5le risi#& price o# remai# t o $aria5les relatio#ship 5et ee# fi#a#cial de$elopme#t a#d eco#omic i#creaseO reduced 5y *o#& F .a#se#3 After i#$esti&ate e employed the *A0 approach e fi#d that there is o#e risi#&

price threshold $alue co#ditio# i# *ai a# a#d t o risi#& price threshold $alue co#ditio#s i# 6apa#3 *he estimatio# results of processi#& o# a##ual i#crease rate of risi#& price a#d eGplori#& the effects of fi#a#cial de$elopme#t o# eco#omic i#crease u#der u#li!e risi#& price routi#es that he# the risi#& price le$el of threshold 5elo

J325perce#t a#d hi&her tha# J325 perce#t tha# the fi#a#cial de$elopme#t may up&rade eco#omic i#crease for *ai a# a#d fi#a#cial de$elopme#t ill #ot

produce a#y effect o# eco#omic i#crease respecti$ely3 Accordi#&ly fi#a#cial de$elopme#t up&rades eco#omic i#crease u#der lo the deeply study results sho 5elo that le$el risi#& price3 I# 6apa#

he# the le$el of risi#& price of threshold is some useful effect o#

?388 perce#t tha# fi#a#cial de$elopme#t sho

eco#omic i#crease3 .o e$er"

he# the risi#& price a5o$e threshold le$el

fi#a#cial de$elopme#t is preDudicious to eco#omic i#crease3 I# the e#d of this docume#t the co#clusio# that 6apa#Ks rate of risi#& price is lo he# the fi#a#cial de$elopme#t esta5lished a#d e fi#d this result or temperate

ill promote eco#omic i#crease ca# 5e ith the help of .uy5e#s a#d )mith" Bose"

a#d 0ousseau a#d Machtel3 I# *ai a# a#d 6apa# the &uessed result o5tai# i# this study that risi#& price threshold occurs i# the co##ectio# 5et ee# fi#a#cial De$elopme#t a#d i#creme#t3 'o e ca# say that some cha#&i#& i# the risi#&

price directly effect o# the co##ectio# 5et ee# t o $aria5les fi#a#cial ).

de$elopme#t a#d i#creme#t3 1o#seque#tly" &eomorpholo&ic up&rade i# risi#& price threshold le$el should 5e ta!e# he# co#structi#& a#d predictio# models of eco#omic i#crease for *ai a# a#d 6apa#3

0inli
'o a dayKs eco#omists 5elie$e that hi&h rates of risi#& prices is a cause of

ma#y %pro5lemsI #ot Dust for o# pro5lem it is a reaso# of ma#y pro5lems3 5ut for mass eco#omic i#terpretatio#3 +$e# so" $ery lo ra#&e of a&reeme#ts a$aila5le

a5out the prices relatio#ship 5et ee# risi#& price F eco#omic i#crease 5eha$ior a#d e#$iro#me#t 5y hich risi#& price effect o# eco#omic i#crease" *he first portio# of the docume#t 5y the help of i#crease eGpe#diture formula F the i#crease accou#ti#& formula eGplai# the effects of the risi#& price o# eco#omic i#crease performa#ce i# 5oth type of &ro i#& a#d de$eloped cou#tries" the solutio# supported the #o#li#ear relatio#ship 5et ee# risi#& price a#d eco#omic i#crease3 I# further 5oth types of cou#tries &ro i#& a#d de$elopi#& cou#tries sho differe#t types of reactio#s of #o#li#earity 5et ee#

the risi#& price a#d eco#omic i#crease relatio#3 I# the &ro i#& cou#tries" the i#formatio# a5out risi#& prices a#d eco#omic i#crease sho s that t o threshold a$aila5le i# the fu#ctio# relati#& risi#& price a#d eco#omic i#crease3 *he first le$el of threshold seco#d le$el of threshold rate of risi#& price is lo as sho ed :; perce#t" F

as sho ed <8 perce#t3 I# the first threshold le$el the similarly the effects of risi#& prices o# eco#omic

i#crease are positi$e a#d accepta5le le$el3 I# *he le$el t o risi#& price rates for )*

Moderate

hich are 5et ee# the t o threshold le$els the effects of risi#& price

o# eco#omic I#crease is #e&ati$e a#d rate of risi#& price is $ery hi&h3 at eGceedi#&ly hi&h risi#& price rate" the 5orderli#e shoc! of part risi#& prices o# eco#omic i#crease lesse#s speedily 5ut is stillImporta#tly #e&ati$ely char&ed3 I# the de$eloped cou#tries" there is o#e threshold is disco$ered a#d the it is $ery importa#t" the le$el of threshold is stro#&er to estimatio# su&&ests a#d model stipulatio#s a#d this importa#t threshold le$el is disco$ered at 2; perce#t" Both types of le$els of threshold cou#tries that is or!s are same i# &ro i#& cou#tries a#d de$eloped the le$el of threshold 2;

ay the rate of risi#& price is 5elo

perce#t3 *he mai# reaso# of #e&ati$e eco#omic i#crease is raisi#& price hile the importa#ce of this #e&ati$e effects o# risi#& price eGceeds this le$el of threshold3 I# this docume#t defi#e 2 le$els of thresholds for 5oth types of cou#tries &ro i#& a#d de$eloped" the effects of 5oth le$el o# these cou#tries are follo sC i# the first le$el of threshold defi#es ( hat risi#& prices 5loc!s i#creme#t" 5ut su5 oofer hich e$er risi#& prices has #o pre&#a#t or e$e# positi$e results o#

i#crease)" hereas i# the seco#d le$el of threshold (i# this le$el defi#es the lar&e amou#t of drop i# the mar&i#al effects of risi#& price occur)3 -urther i# this docume#t eGplai# #o#li#earity effects o# 5oth types of cou#tries (&ro i#& a#d de$eloped)" a#d &ro i#& a#d de$eloped cou#tries ha$e a differe#t type of #o#li#earity i# the risi#& price a#d eco#omic i#crease relatio#3 -or &ro i#& cou#tries these researches sho some useful a#d ell defi#e policy

implicatio#3 -irst defi#e the ra#&e of mar&i#al #e&ati$e effects o# moderate )&

risi#& price a#d the ra#&e is :; to <8 perce#t is me#tio#ed3 Me ca# reduce eco#omic i#crease 5y a5out 032-03; perce#t poi#ts if i#crease i# risi#& price 5y :0 perce#t poi#t per year ill effect o# eco#omic i#crease rate3 *his ad$ice ill lead to a su5sta#tial

effect o# lo#& term moderate risi#& price o# i#crease #e&ati$e effect o# eco#omyKs performa#ce3

)eco#d importa#t thi#& i# this docume#t for policyma!ers

ill #ot !eep the

risi#& price le$el at 0 perce#t si#ce the first le$el of threshold of :; perce#t does #ot impede F e$e# sta5le eco#omic performa#ce3 *hird mai# thi#& i# this docume#t hyperi#flatio# a#d it is #ot ha$e a#y hyper-i#flatio# effects of eco#omic i#crease 5ecause moderate risi#& price is &rater that mar&i#al impact of hyperi#flatio#s similarly e ca# say that decrease i# the hyperi#flatio# rate

ha$e #ot a#y importa#t effects o# eco#omic i#crease3 *herefore the mai# &oal of policyma!ers i# &ro i#& cou#tries is co#trolli#& moderate risi#& price3 I#dia has ma#a&ed its eco#omic sta5ility at the most appropriate o#ly t o i#cide#ts hich sho ay3 *here are

the eco#omic sta5ility 5ut they ha$e ma#a&ed

their dema#ds a#d supply $ery effecti$ely3 I#dia# mo#itory a#d fiscal policy helps the cou#try i# ma#a&i#& its fi#a#cial i#crease a#d sta5ility throu&h the year a#d helps i# its people &ro th3 )i#ce the de$eloped cou#tries eGpress a differe#t desi&# of #o#li#earity i# the risi#& price- eco#omic i#crease e#terprise C the ma&#itude of the 5ad impressio# of risi#& prices o# i#creme#t dimi#utio#s as the risi#& price rate multiplies" a#d e$e# the lo de&ree risi#& prices rate has a

pote#t disco#firmi#& effect o# eco#omic i#crease" policyma!ers i# de$eloped

)=

cou#tries" u#li!e those i# e$ol$i#& 9a#ds" should eGercise attempts to !eep the risi#& price rate at @ero perce#t seei#& as a little 5it of additio# i# risi#& prices ill cause a importa#t simplificatio# i# eco#omic i#crease3 *his determi#atio#" to some eGte#t" su5scri5es the i#flatio#-tar&eti#& pecu#iary policy espoused 5y 'e Peala#d" 1a#ada" the (#ited 2i#&dom" a#d other cou#tries3 *he seco#d portio# of this docume#t is $ery importa#t a#d i# this seaso# attempted to fi#d the ay hich risi#& price affects o# eco#omic i#crease i# a

#o#li#ear method for lo#& term period3 *here is t o mai# tools (li#ear model a#d the model ith threshold effects) are used for eGami#ed the efficie#cy of

i#$estme#t a#d the le$el of i#$estme#t3 *he useful thi#& is (*-> i#crease) for 5oth types of cou#tries &ro i#& a#d de$eloped" 5ut #ot the i#$estme#t le$el (I#$estme#t //0,)) D,M+)*I1 >0,D(1*)" the cha##el hich #o#li#early

affects eco#omic &ro th a#d risi#& price ad$ersely is hypothesi@ed 5y eGisti#& theoretical models3 -urther more for &ro i#& cou#tries the le$el of moderate risi#& price is 5elo 85 perce#t a#d for de$eloped cou#tries the le$el of moderate risi#& price is 5elo ;2 perce#t" risi#& price sho the si&#ifica#t effects o# i#$estme#t le$el3 Most

curre#t studies eGplai# 5et ee# risi#& price a#d lo#& term eco#omic i#crease role of the le$el of i#$estme#t (capital accumulatio#)3 *hus" accordi#& to paperKs co#tri5utio# e ca# say that the *-> i#crease is a importa#t cha##el actually hich risi#& price affects eco#omic i#crease i#

*-> is o#ly cha##el throu&h

#o#li#ear method for lo#& term period3

)-

Prasanna v $alian4D 'opakumar+ *5

*his research moti$ated 5y the curre#t de$elopme#ts o# the relatio#ship 5et ee# risi#& price a#d eco#omic i#crease a#d also pro$ed some useful a#d importa#t tips for de$eloped a#d &ro i#& eco#omies3 I# this docume#t" tally the lo#& term a#d short term dy#amics relatio#ship of risi#& price a#d eco#omic i#crease 5y usi#& error correctio# model a#d co-i#te&ratio# model3 I# I#dia e ca# tell that

usi#& a##ual i#formatio# that the importa#t o5Decti$e to search that if there is a#y relatio#ship i# risi#& price a#d eco#omic i#crease a$aila5le tha# its a#y reaso# or its #ature3 *he eGiti#& result fou#d a5out this situatio# is that first is risi#& price a#d eco#omic i#crease is #e&ati$ely related a#d the seco#d thi#& is i#crease to cha#&es i# risi#& prices rates is smaller tha# risi#& prices to cha#&es i# i#crease rates3 *hese solutio#s ha$e mai# policy implicatio#s3 I# this research the risi#& price a#d eco#omic i#crease #eGus has 5ee# systematically a#aly@e i# I#dia3 *he importa#t result is that from the pre$ious period if a#y i#crease i# risi#& price #e&ati$ely effect o# eco#omic i#crease3 *he most desired policy is there is al ays a co#sta#tly do # press o# risi#& price ithout a#y i#formatio# a5out hat is the threshold le$el3 Moreo$er

policyma!er #otes that #e&ati$e effect o# eco#omic i#crease 5y the a#y i#crease i# risi#& price from the last #ay period at a#y le$el3 *he mai# reaso# is decisio# ma!er a#d commo# peoples do #ot li!e risi#& price has e#ormous 5eha$e o# the co#sumptio# method3 I# I#dia risi#& price has commo#ly u#der co#trol3 =arious fiscal mo#etary a#d 2%

admi#istrati$e measures playi#& a# importa#t role i# I#dia to co#trol a risi#& price there is t o period of risi#& price si#ce :?80 5ut admi#istrati$e measures a#d $arious fiscal mo#etary co#trolled risi#& price efficie#cy3 Also the results of i#$estme#t 5eha$ior i# pri$ate ma#ufacturi#& tell that a# i#crease i# le$el of risi#& price rate is #e&ati$e 5eha$ior o# pri$ate i#$estme#t i# ma#ufacturi#&3 I#dia has ma#a&ed its eco#omic sta5ility at the most appropriate o#ly t o i#cide#ts hich sho ay3 *here are

the eco#omic sta5ility 5ut they ha$e ma#a&ed

their dema#ds a#d supply $ery effecti$ely3 I#dia# mo#itory a#d fiscal policy helps the cou#try i# ma#a&i#& its fi#a#cial &ro th a#d sta5ility throu&h the year a#d helps i# its people &ro th3

$tanley Fischer
0isi#& prices is importa#tly correlated utili@i#& the eco#omic i#crease rate3 *he simple re&ressio#s pa#el i#dicates or descri5ed the relatio#ship 5et ee# three $aria5les risi#& price u#e$e##ess eco#omic i#crease a#d risi#& price3 'o possi5le throu&h it is

ith the help of i#creme#t accou#ti#& model to spot that mai# &roo$es hich risi#& price comes do # eco#omic i#crease3 I# this research ith help of past research papers a#d studies that

docume#t the author descri5ed

results of the docume#t i#culpated that risi#& price effected o# eco#omic i#crease 5y cutti#& the rate of producti$ity i#crease a#d trimmi#& do # i#$esti#&3 Me also see i# eGceptio#al cases that i# lo#& term period the lo risi#& price a#d small deficits ere #ot importa#t for hi&h i#creme#t" hi&h risi#&

prices as #ot co#siste#t ith sur$i$ed i#creme#t3 2#

&@POT&%$I$:
Mhether there is impact of cpi o# &dp &ro th3

*here is #o impact of cpi o# &dp &ro th3

*here is #o impact of traili#& cpi o# &dp &ro th3

,)RI);/%$:

D+>+'D+'*C /D> &ro th

I'D+>+'D+'*C 1>I" lo& 1>I

0esearch is 5ase o# qua#titati$e 5ases a#d the data collectio# is o# seco#dary 5asis from pu5lished data of state 5a#! of >a!ista# a#d some 5usi#ess #e s papers i#cludi#& eco#omic sur$ey of >a!ista# reports+ 2)

0O"%/ )!" FR)0% .OR*

(PI
'"P 'RO.T&

(PI-4

0%T&O"O/O'@:
Most of the i#formatio# e collect o# this su5Dect used lar&e #um5er of cou#tries reporti#& ith co#trol pa#el i#formatio# a#d cross5reed sectio#ed i#formatio#3

-or eGample )e#hadDi" !ha# a#d Burde!i# draped ma#y cou#tries used cross5reed sectio#ed i#formatio# i# the dia&#ostic3 If i#di$idual cou#tries ha$e a risi#& prices i#creme#t relatio#ship researchers chose cross5reed sectio#ed i#formatio# 5ecause i#di$idual cou#try &e#erally lac!s the strai# of risi#& price eGperie#ce #ecessary to ascertai#3 Qet +asterly a#d Bru#o descri5ed i#formatio# from cou#tries he#

ith ;0 perce#t or more tha# ;0 perce#t risi#& price

are eGcluded from the dia&#ostic tha# a#y cross5reed sectio#ed relatio#ship 5et ee# eco#omic i#crease a#d risi#& price loses importa#ce3 I# the similar fashio#" Barro a#d -ischer used co#trol pa#el i#formatio# to ta!e i#to thou&htful the time proportio# of risi#& price a#d eco#omic i#crease3 *here are $ery fe researches or sur$eys I# particular cou#tries Mu5ari! research a#d )i#& research 22

5oth used i# their research time series data to calculate the rate of threshold risi#& prices3 Mhile i# this research reports data a5out 1,')(M+0 >0I1+ I'D+N" F /0,)) D,M+)*I1 >0,D(1* ta!es from the )tate Ba#! of >a!ista# a#d +co#omic >olicy Departme#t li5raries or stora&e machi#es3 * o types of data i#formatio# is used to e$aluate the mecha#ism throu&h risi#& prices impairs lo#& term eco#omic i#crease a#d to i#quire the relatio#ship 5et ee# risi#& price a#d eco#omic i#crease3 I# the period :?5: to 20:0 the empirical frame or! accou#t ha$e used yearly i#formatio# of /ross Domestic >roduct a#d 1o#sumer >rice I#deG fou#d from the >a!ista# Bureau ,f )tatistics" i# the first phase i# this empirical form or! for eGample the co##ectio# 5et ee# risi#& price a#d eco#omic i#crease"

fire ood of eGiste#t 1o#sumer >rice I#deG (: 1>It R) F (2 1>It-:) ha$e 5ee# used3 Moreo$er" eco#omic i#crease rates are calculated from the de$iatio# of fire ood of 1ross >rice i#deG a#d from fire ood rates of risi#& prices3

2/

0o el $pecification an %stimation TechniEue

Me used the follo i#& li#ear re&ressio# equatio# formulaC *he mai# purpose of the simple li#ear re&ressio#s as to u#co$er the &e#eral 5eha$e of the i#creasi#& fu#ctio# relati#& the risi#& price rate a#d eco#omic i#crease3
GDPGt = + :CPI t + 2 CPI t :

Mhere
GDPGt = /ross domestic product &ro th o$er a year
F = >erameters

CPI t = 1urre#t yearKs co#sumer price I#deG

CPI t : =*raili#& yearKs co#sumer price I#deG

*he first re&ressio# equatio# formula descri5ed that commo# li#ear frame or!3 +$e# so" i# a5o$e discussio# e ca# easily descri5ed ith the help of rece#t ith a risi#& price rate

studies that *hreshold impacts are a# accompa#ime#t i#creasi#& some importa#t $alue or 5elo 2.

some importa#t $alues accordi#& to

)mith" Boyd F 9e$i#e3 I# differe#t

ords

e ca# say that the relatio#ship o#e specific patter#3

5et ee# risi#& price a#d eco#omic i#crease does #ot follo I# this empirical frame or! threshold effects

ith estimatio# a#d i#fere#ce

related eco#ometric issues3 *o co#duct correct results it is importa#t to fi#d a#d create suita5le methods3 I# this curre#t importa#t phase e eGplai# a thou&htful

a#d #o#tech#ical co#cept of the methodolo&y3 I# this equatio# formula the mai# t o $aria5les 9o& of 1o#sumer >rice I#deG (1>I) a#d 1o#sumer >rice I#deG (1>I) calculate the le$el of risi#& price o# /ross Domestic >roduct (/D>) i#crease3 *he calculated solutio# from the simple re&ressio# frame or! (:) is some co#siste#t" eGte#t ith the eGisti#& co#ditio#+

2*

R%$#/T )!" "I$(#$$IO!

>$p growth shows the 1p an$ $own tren$ from #-.# to )%#%?

2&

Cpi @cons1mer price in$e4 A shows the 1p war$ tren$ from #-.# to )%#%?

$#00)R@ O#TP#T
Regression Calculations %?%/%&2. B1ltiple C =#* %?%%#*.C !81are /%& ' A$D1ste$ C %?%22--. !81are *#/ !tan$ar$ )?/==.%. Error &2# ;(servations .-

Anal3sis of Eariance@ AN;EAA Cegressi df ) SS %?.&*/ MS %?)==) F %?%/*. Significanc eF %?-./.*)*

2=

on Cesi$1al Total .* .=

)# 2/*?&= 2/&?2* ./

# *?#-)* *#

/#

*-

S!"#$%: T&'( ()"*+

+Gpla#atory po er of model is as lo as 03:8A hich is hi&hly i#si&#ifica#t3 As A',=A ta5le sho s $ery lo - statistics of 030; (cutoff of - statistics is ;)3 Moreo$er the - statistics also reflect that the model is i#si&#ifica#t3

Interce pt CPI CPI6#

Coefficient .?#.%%-& .%/ %?%2)%)* %-' %?%2.%2% )

Stan- Error %?/22/-=* =2 %?#%*).-. %/ %?##&.2/. #)

t Stat ##?==% 2# %?2%#2 -. ' %?)-=% /

P-value *?#=E' #& %?&*/) 2 %?&**& &/

95% Lower /?)=#*-. )-& ' %?#=%=2& )* ' %?)&%/=% ##

95% Upper *?%#=/-&# %?)//==/* %?)%%/#&)

S!"#$%: T&'( ()"*+

*he i#si&#ifica#ce of i#di$idual $aria5les is also o5ser$ed from t statistics hich are 03< a#d -032? respecti$ely (cutoff of t is 2)3 ,#ly i#tercept is si&#ifica#t hich is further $alidated 5y p-$alue as 5oth the coefficie#tsK p-$alue are #ot less tha# 03053

%Euation F 5 %stimation:
GDPGt = + CPI t

2-

*his equatio# sho s the si#&le $aria5le 1o#sumer price i#deG at time t (1>I t) to estimate the &ro th i# /D>3
Regression Calculation %?%%=& B1ltiple C %& &?.=E' C !81are %. ' A$D1ste$ C %?%#&/ !81are & !tan$ar$ )?/*=. Error 2* ;(servations .-

Anal3sis of Eariance@ AN;EAA df Cegressi on Cesi$1al Total # .& .= SS %?%)*2 22 2/&?22 -# 2/&?2* ./ MS %?%)*2 22 *?%-2* *= F %?%%/2 )# Significance F %?-/&=#&%# /

S!"#$%: T&'( ()"*+

0-square sho s &ood#ess of fit

hich is $ery lo

hich mea#s o$erall model is

#ot fit3 A',=A ta5le sho s that $ery lo

Coefficient .?#)*%2= )/ %?%%%/#) /StanError %?/))/-= 2)) %?%%*)&/ &-#

- calculatio# of 0300; (cutoff of 95% Lower /?)&----/= ' %?%#)#.) .& 95% Upper .?-&)%&* .2 %?%#)-&& ./

statistics is ;)3 - statistics also i#dorses that the model is i#si&#ifica#t3

t Stat #)?#2) *= %?%*.& 2& P-value #?-=E' #& %?-/&= #&

Interce pt CPI

S!"#$%: T&'( ()"*+

*he i#si&#ifica#ce of i#di$idual $aria5le is also o5ser$ed from t statistics is 03085 hich is less tha# 2 a#d it is further $alidated throu&h p-$alue #ot less tha# 03053 ,#ly i#tercept is si&#ifica#ce

hich hich is

/%

(O!(/#"I!' R%0)R*$
*he mai# purpose of this empirical accordi#& to the periods of yearly i#formatio# :?5:-20:0 e calculate the Impact of risi#& price o# eco#omic e fou#d there is #o impact

&ro th i# >a!ista#3 After study all the i#formatio#

o# &ro th of risi#& price i# >a!ista#3 *his phase is $ery importa#t for >a!ista# risi#& price rate le$el 5ecause is this docume#t e fi#d out a poi#t of $ie

&radually comi#& i#to 5ei#& a relatio#ship 5et ee# 2 $aria5les risi#& price F eco#omic i#crease i# >a!ista#3 I# this co#ditio# li#ear re&ressio# test methodolo&y employed to defi#e the relatio#ship a5out risi#& price a#d eco#omic i#crease3 +Gami#e the relatio#ship 5et ee# t o $aria5les risi#& price a#d eco#omic i#crease e used 1o#sumer price i#deG (1>I) as a po er of

attor#ey docume#t for risi#& price a#d the /ross Domestic >roduct (/D>) as a po er of attor#ey docume#t for eco#omic i#crease3 *his importa#t i#formatio# is 5elo#& a period from :?5:-20:03 (si#& the re&ressio# frame or! I o5tai# the results of statio#ary test3 *he #ull possi5ilities 5ei#& that there are cellular le$els 5ut #e&lect to decli#e at first difference inculpating that the things were found insignificance. So neglect to refuse the possibility. As this study resem5la#ce to Ma#@oor .ussai# (2005)" his fi#di#& is same that the result is i#si&#ifica#t so that there is #o threshold le$el of i#flatio# i# >a!ista# so far as I fou#d that i#si&#ifica#cy i# result3

/#

Accordi#& to Mu5ari! descriptio# the threshold rate of le$el risi#& price is ?perce#t i# >a!ista#3 +$e# so" a rise i# i#terest rates is ofte# co#tempora#eous ith a# i#crease i# risi#& price is fou#d to ha$e importa#t positi$e effects o# eco#omic i#crease up to 5A risi#& price le$el rate3 I# additio# ith this poi#t" the impact a rise i# i#terest rates is ofte# co#tempora#eous price o# i#creme#t ith a# i#crease i# risi#&

is positi$e 5ut i#flue#ce3After dra i#& reaso#i#& a#d ithi# the ra#&e of

co#clusio# recommdatio# is to !eep i# >a!ista# risi#& price

; to 8 perce#t3 )o it may 5e useful for capa5le of 5ei#& mai#tai#ed eco#omic i#crease3 )imilarly e ca# study the same )i#&hKs idea 200< additio#3 .e

descri5es the rate of tar&eti#& risi#& price ra#&e i# I#dia is ; to J perce#t3 )o here e ca# say that risi#& price i# >a!ista# is su5Dect a5out the dema#d" supply a#d stoc!s it is #ot a relati#& to or i#$ol$i#& phe#ome#o# completely3 *o !eep risi#& price i# co#trol i# >a!ista# it should calls a policy throu&h 1e#tral Ba#! of >a!ista# (1B>)3

/)

R%FR%!(%$
03Barro =ol J8(:??8). 0e$ie 3 Inflation and growth!" 0eser$e Ba#! of )t3 9ouis

0o5ert 6 Barro 1am5rid&e press (:??J) Determinants of #conomic Growth$ a Cross Country #mpirical %tudy!. M3Bru#o" a#d +asterly"( :??8) =ol3;: Inflation crises and long&run growthI" Mo#etary 6our#al3 )3-ischer"(:??<) =ol3'( The role of macroeconomic factors in economic growth!Mo#etary +co#omics Dour#al3 )ahay 0at#a" )ta#ley" -ischer" a#d =S&h" (:??8) =ol3:0" %tabili)ation and Growth in Transition #conomies$ The #arly #*perience"! eco#omics Dour#als3 Bruce" .a#se# (:???)" =ol3?< eco#ometrics Dour#al. Threshold #ffects in +on& Dynamic Panels #stimation" Testing and Inference!. .a#se#" %ample %plitting and Threshold #stimation"! May (2000)" =ol3 88 1ho dhury a#d A .ussai#" (:??8) 9,'D,'. Policies in De.eloping Countries!. ,onetary and -inancial

2ha#" A3" 20003-+D+0A9 0+)+0=+ BA'2 ,- >.I9AD+9>.IA" -e5ruary (2000) The finance and growth ne*us. /usiness!. )3 )e#hadDi a#d" Mohsi# ) !ha#3 (2000) IM- Mor!i#& Paper Threshold #ffects in the 0elationship between Inflation and Growth!. /2

0e#elt3 D a#d 039e$i#e"( :??2)America# eco#omic re$ie "$ol382 1 sensiti.ity analysis of cross&country growth 0egressions!.

Qasir Ali Mu5ara! (2005) $olume :" #o : (2005 ) Inflation and Growth$ 1n #stimate of the Threshold 2e.el of Inflation in Pakistan I )tate Ba#! of >a!ista# 0esearch Bulleti#3 23 1ho dhury a#d 2ear#y" (:??J)3=ol3 (3 Inflation and economic growth$ a multi& Country empirical analysis! Michael" sarel" (:??8)" +onlinear #ffects of Inflation on #conomic Growth "I IM>apers" $ol ;<(march) I#ter#atio#al Mo#etary -u#d3 2aliappa 2 a#d 23 )i#&h3 (200<) 6our#al of policy Modeli#&3 The Inflation& Growth +e*us in India$ 1n #mpirical 1nalysisI =ol 3253 International 0esearch 4ournal of -inance and #conomics! =ol3 :J (2008) +uro6our#als >u5lishi#&" I#c3 AleGa#der Bic!3 Departme#t of +co#omics" Threshold e ects of 0ising Price on economic Increase in de.eloping countries! AleGa#der Bic! Departme#t of +co#omics" /oethe (#i$ersity -ra#!furt3 Mor!i#& >aper )eriesC M> 080;!0ising Price and #conomic Increase in /angladeshIC Ahmed )hamim a#d /olam Morta@a Decem5er "(2005) >olicy A#alysis (#it" 0esearch Departme#t" Ba#&ladesh Ba#!3 0ising Price on #conomic Increase$ #.idence -rom -our %outh 1sian Countries! Malli! /iriDasa#!ar a#d 1ho dhury A#is Asia->acific De$elopme#t 6our#al" =ol3 8" 'o3 :" 6u#e (200:) I#dia# //

+co#omic )er$ice3 0ising Price on #conomic Increase in India 51n #mpirical 1nalysis I 3>rasa##a = )alia#:"/opa!umar3 22 Ma#@oor .ussai#3 ,cto5er 2005"! 0ising Price and Increment$ #stimation of Threshold Point -or Pakistan!.+co#omic >olicy Departme#t" )tate Ba#! of >a!ista#3 Niao 6i#&3(200J)!The 0elationship between 0ising Price and #conomic Increase of China!.

/o!al =i!esd F .a#if )u5ri#a3!0elationship between 0ising Price and #conomic Increase!. Mor!i#& >aper =ol3 ; Decem5er 200; +co#omics Departme#t 0eser$e Ba#! of -iDi )u$a -iDi3 Mi#li=ol :; (2005)!.0ising Price and #conomic Increase$ Threshold #ffects and Transmission ,echanismsI Departme#t of +co#omics" (#i$ersity of Al5erta3 1hie#-1hia#& 9ee a#d ) ee Qoo#& Mo#& =ol3< #o32(20:0)" 'atio#al 1hu#& .si#& (#i$ersity 6our#al C)ustai#a5le De$elopme#t: 0ising Price and #conomic Increase in +igeriaI +co#omic departme#t3

/.

)PP%!"I<
RESIDUAL OUTPUT Observatio n 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Predicted GDP Growth 5.40966923 5.375763562 5.365025494 5.368555743 5.363334031 5.377904791 5.399285115 5.372069023 5.372515079 5.336530274 5.318532279 5.318054904 5.306114643 5.264828627 5.227170583 5.176989977 5.108163708 5.076927116 5.046786647 5.128253878 5.278901989 5.21439201 5.028316518 4.684031472 4.810484597 5.305675899 5.211733901 5.136762926 5.04528812 4.909348436

Residuals -7.2096692 -3.6757636 4.83497451 -3.3685557 -1.863334 -2.3779048 -2.8992851 0.12793098 -4.4725151 -0.4365303 0.68146772 1.8819451 1.19388536 4.13517137 2.37282942 -2.07699 1.69183629 1.42307288 4.75321335 -3.9282539 -2.978902 1.58560799 2.47168348 -0.7840315 -1.5104846 -2.5056759 2.4882661 0.36323707 2.25471188 1.49065156

/*

RESIDUAL OUTPUT Predicted GDP Growth 4.986919241 5.230122897 5.172356402 5.101921824 5.04391094 4.99572828 4.9373396 4.833705186 4.713272626 4.579791295 4.774154681 5.21469871 5.108008203 4.97240905 4.81978924 4.660808489 4.501411801 4.380753567 4.290647045 4.21437146 4.619359754 5.306156493 5.272613671 5.207190193 5.117518486 5.029539172 4.917318014 4.71085618 4.449916928 Residual s 2.613081 1.569877 -1.17236 3.598078 1.356089 0.804272 1.46266 -0.03371 -0.11327 1.020209 2.925845 -2.9147 -0.60801 -0.87241 1.780211 -2.96081 -1.00141 -0.18075 -0.39065 -2.21437 -1.51936 -0.60616 2.227386 3.79281 0.682482 1.770461 2.282682 -6.31086 -0.64992

Observation 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59

/&

"epen ent variable: /D> &ro th3 In epen ent variable: 1>I F lo& 1>I 0etho : re&ressio# model Observations : 80

Regression Calculations %?%/%&2. B1ltiple C =#* %?%%#*.C !81are /%& ' A$D1ste$ C %?%22--. !81are *#/ !tan$ar$ )?/==.%. Error &2# ;(servations .-

Anal3sis of Eariance@ AN;EAA df Cegressi on Cesi$1al Total ) .* .= SS %?.&*/ )# 2/*?&= 2/&?2* ./ MS %?)==) # *?#-)* *# F %?%/*. /# Significanc eF %?-./.*)* *-

/=

Interce pt CPI CPI6#

Coefficient .?#.%%-& .%/ %?%2)%)* %-' %?%2.%2% )

Stan- Error %?/22/-=* =2 %?#%*).-. %/ %?##&.2/. #)

t Stat ##?==% 2# %?2%#2 -. ' %?)-=% /

P-value *?#=E' #& %?&*/) 2 %?&**& &/

95% Lower /?)=#*-. )-& ' %?#=%=2& )* ' %?)&%/=% ##

95% Upper *?%#=/-&# %?)//==/* %?)%%/#&)

"epen ent variable: /D> &ro th3 In epen ent: 1>I3 0etho : re&ressio# model3 Observations: 80

Regression Calculation %?%%=& B1ltiple C %& &?.=E' C !81are %. ' A$D1ste$ C %?%#&/ !81are &

/-

!tan$ar$ Error ;(servations

)?/*=. 2* .-

Anal3sis of Eariance@ df Cegression # Cesi$1al .& Total .=

AN;EAA SS %?%)*222 2/&?22-# 2/&?2*./

MS %?%)*222 *?%-2**=

F %?%%/2)#

Significance F %?-/&=#&%#/

Interce pt CPI

Coefficient .?#)*%2= )/ %?%%%/#) /-

StanError %?/))/-= 2)) %?%%*)&/ &-#

t Stat #)?#2) *= %?%*.& 2&

P-value #?-=E' #& %?-/&= #&

95% Lower /?)&----/= ' %?%#)#.) .&

95% Upper .?-&)%&* .2 %?%#)-&& ./

'R)P&I()/ R%,I%.

.%

.#