EQUILIBRIUM VERSUS DISEQUILIBRIUM THEORIES OF BUSINESS CYCLES: Evidence from Pakistan Economy
This paper tests the Keynesian, monetary and real business cycle theories using annual data from Pakistan covering period 1953-2004. An error-correction equation to explain inflation is presented that passes the Chow test for parameter stability and fits the data well. Based on this error- correctio...
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Veröffentlicht in: | Pakistan economic and social review 2005-07, Vol.43 (1), p.1-20 |
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Hauptverfasser: | , , |
Format: | Artikel |
Sprache: | eng |
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Online-Zugang: | Volltext |
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Zusammenfassung: | This paper tests the Keynesian, monetary and real business cycle theories using annual data from Pakistan covering period 1953-2004. An error-correction equation to explain inflation is presented that passes the Chow test for parameter stability and fits the data well. Based on this error- correction equation a vector error correction model is estimated to provide evidence on the dynamics between prices, money, interest rates and real output. Variance decomposition and impulse responses from this vector-error correction model support the disequilibrium (Keynesian) business cycle theory which claims that effects of monetary shocks on real output do not die down quickly. |
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ISSN: | 1011-002X |