Effect of Price Instability on Economic Growth of Pakistan

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EFFECT OF PRICE INSTABILITY ON ECONOMIC GROWTH IN PAKISTAN
An Econometric Approach

By

HASSAN BIN TARIQ
Student of MBA (III)
Section: B
Roll no. 1014142

In the guidance of
M.A JALIL
Senior lecturer (Research Synopsis)

Federal Urdu University of Arts, Science & Technology, Karachi Campus: Abdul Haq
TABLE OF CONTENTS:

Page No.
ABSTRACT ………………………………………………………. 3

SECTION – 1 >>> INTRODUCTION 4 to 5

1. Background ……………………………………… 4 2. Significance of study ………………………….. 4 3. Objective of research ………………………….. 5

SECTION – 2 >>> REVIEW OF LITERATURE 6 to 8

1. Introduction ……………………………………. 6 2. Literature Reviews…………………………….. 6

SECTION – 3 >>> TREND ANALYSIS 9 to 12

3.1. 1st Period ………………………………………. 9
3.2. 2nd Period ………………………………………. 11
3.3. 3rd Period ……………………………………….. 11

SECTION – 4 >>> DATA AND METHODOLOGY 13 to 15

4.1 Introduction …………………………………… 13
4.2 Choice of variables …………………………… 13
4.3 Methodology ………………………………….. 14
4.3.1 Regression analysis ………………………. 14

CONCLUSION ………………………………………………… 15

REFERENCES …………………………………………………. 16

Abstract:

Pakistan is in the really big trouble which is the war against terror. Due to this unintended war, allocation of developmental funds with in the country has been disturbed and Pakistan has to approach IMF (International monetary funds) to restore its economy in November 20008. In this environment, there is no question of any new investment by local or foreign investors. More significantly the current government is not serious in solving the problems of deprived people.

This research focuses on the impact of price instability on economic growth. To achieve this objective, many economic variables have been selected which includes

>> Consumer expenditure on durable and non-durable goods and services (food, products, health care and so forth).
>> The sum of all expenditures on investments (such as housing, retail inventory, structures and capital).
>> Government spending on goods and services (military equipment and official salaries, for instance).
>> The difference between products that are imported and products that are exported.

The data period covers from 1980 to 2008. Econometric models have been constructed to Identify main effects of price instability on economic growth. Proposed results are in favor of negative relationship between price instability and economic growth.

SECTION- 1
Introduction
1. . Background

Due to war on terror, Pakistan is paying high economical and social cost. The current government has to face enormous challenges at economic and social fronts, due to the policies of past government. These economic problems have become more crucial with the continuity of previous government policies by the present government. Secondly government is not making any appropriate policy formulation to rectify the major issues like energy crises price instability, low exports, low foreign exchange reserves and other social and political issues which are giving negative impact on economic growth of Pakistan.

Price instability and economic growths are momentously affected by the war on terror. These variables are directly inter\linked with one another. Price instability exposes an unstable economy in which the values of goods depreciate with time to time. Employees demanding high wages to overcome there increasing cost of output. That’s why, manufacturers in turns to raise the price of their selling goods to cover the increase of wages of employees.

When the demand of wages increase and the price of goods increase than inflation rate is...
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