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The Role of Money in Explaining Business Cycles for a Developing Economy: The Case of Pakistan

Ahmed, Shahzad and Pasha, Farooq and Rehman, Muhammad (2014): The Role of Money in Explaining Business Cycles for a Developing Economy: The Case of Pakistan.

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Abstract

In this paper, we establish the empirical linkages between nominal and real variables of Pakistani economy using both annual and quarterly data. The focus of our empirical analysis has been limited to the post financial liberalization period starting in early 1990s. Furthermore, this paper theoretically evaluates the role of money and monetary policy in propagating business cycle fluctuations of Pakistani economy using different ways of introducing the role of money via money in utility (MIU) and cash in advance constraint (CIA) as well as with different formulation of monetary policy either through a money growth rule or Taylor type interest rate rule.

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