Inflation, Income Inequality and Economic Growth in Pakistan: A Cointegration Analysis

Ali, Sharafat (2014): Inflation, Income Inequality and Economic Growth in Pakistan: A Cointegration Analysis. Published in: International Journal of Economic Practices and Theories , Vol. 1, No. 4 (January 2014): pp. 33-42.

Abstract

The study is an attempt to explore the impact of inflation and income inequality in Pakistan. The study also analyzes the effect of foreign direct investment, workers’ remittances and manufacturing value added on growth. Annual time series data from 1972 to 2007 was used for the analysis. After finding all of the time series stationary at first difference, Johansen cointegration approach and vector error correction models are applied for the long run and short run analysis, respectively. The cointegration test results confirmed growth increasing impact of income inequality in Pakistan. Foreign direct investment, remittances and manufacturing valued added are found to have positives and significant impact on growth in Pakistan. The study also suggests some policy implications.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inequality, Development, Manufacturing Value Added, Investment, Time Series, Unit Root, Error Correction, Pakistan
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; L - Industrial Organization > L6 - Industry Studies: Manufacturing; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P24 - National Income, Product, and Expenditure ; Money ; Inflation

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