Money Supply, Fiscal Deficit, and Inflation: Evidence for Pakistan

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Money Supply, Fiscal Deficit, and Inflation: Evidence for Pakistan

Author(s) : Masood Hassan, Mubashar Hassan Zia and Mirza Adeel Baig

Abstract:
There has been Investigation of relationship among money supply, budget deficit and inflation in this research study. Data for the period 1990-2017 has collected from the state bank of Pakistan and World Bank economic indicators on their website. In analysis, we have used unit root test, regression analysis and co-integration test for applying to the information gathered through secondary resources. In findings, we have key outcomes that money supply and inflation have different effects on the fiscal deficit. Our result has supported a positive relationship in between fiscal deficit and money supply. We had also explored the negative relationship between inflation and fiscal deficit. This mention that government has to implement such policies, which can control the inflation and money, supply both for reduction in fiscal deficit. Increase in inflation, decrease in money supply and later increase in fiscal deficit make bad impact to the Economy of Pakistan.