Papers on Relationship between Inflation and Relative Price Variability: Case of Pakistan
Author: Saghir Pervaiz Ghauri

The role of monetary policy is to contribute to sound economic performance and improved living standard of general public by keeping inflation low, stable and predictable. For these reasons, the relationship between inflation rate and relative price variability is important to explore and this piece of information is important for efficient monetary and fiscal policies. As Friedman (1977) made clear in his Nobel lecture, relative price variability is a direct means by which inflation can induce welfare-diminishing resource misallocation. However, research on general price level usually focuses on the mean of individual price changes, despite the fact that there is strong evidence that the mean of this distribution is in some way associated with its variance. Moreover, some important economic information is contained in the variability of individual prices and in the relationship between mean and variability. Particularly, the relationship of mean of price changes (commonly referred to as general inflation) and higher moments of the distribution of individual price changes (also termed as relative price changes) is very important to explore and it has significantly attracted the attention of economic research (see for instance, Park 1978; Debelle and Lamont 1996). Supervisor:- Dr. Abdul Qayyum

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Keywords : Inflation, Pakistan, Relationship, Relative Price Variability
Supervisor: Abdul Qayyum
Cosupervisor: Muhammad Iqbal

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