INTERNATIONALIZATION OF RELATIONSHIP BETWEEN INFLATION AND MONEY SUPPLY POLICIES: AN EMPIRICAL STUDY OF PAKISTAN

Abstract

This study finds out the determinants of inflation by using cointegration and error corrections techniques, respectively. Money supply, real GDP, and foreign inflation significantly and positively impact inflation. This study recommends that state bank is responsible for maintaining a stable inflation level by controlling the money supply level. Similarly, state banks should provide domestic credit for capital formation goods to enhance economic growth.