Inflation, Income Inequality and Economic Growth in Pakistan: A Cointegration Analysis

International Journal of Economic Practices and Theories, Vol. 4, No. 1, pp. 33-42, 2014

10 Pages Posted: 21 May 2014

See all articles by Sharafat Ali

Sharafat Ali

Government Postgraduate College Kot Sultan - Department of Economics

Date Written: 2014

Abstract

The study is an attempt to explore the impact of inflation and income inequality in Pakistan. The study also analyzes the effect of foreign direct investment, workers’ remittances and manufacturing value added on growth. Annual time series data from 1972 to 2007 was used for the analysis. After finding all of the time series stationary at first difference, Johansen cointegration approach and vector error correction models are applied for the long run and short run analysis, respectively. The cointegration test results confirmed growth increasing impact of income inequality in Pakistan. Foreign direct investment, remittances and manufacturing valued added are found to have positives and significant impact on growth in Pakistan. The study also suggests some policy implications.

Keywords: Inequality, Development, Manufacturing Value Added, Investment, Time Series, Unit Root, Error Correction, Pakistan

JEL Classification: C22, L6, O4, P24

Suggested Citation

Ali, Sharafat, Inflation, Income Inequality and Economic Growth in Pakistan: A Cointegration Analysis (2014). International Journal of Economic Practices and Theories, Vol. 4, No. 1, pp. 33-42, 2014, Available at SSRN: https://ssrn.com/abstract=2439021

Sharafat Ali (Contact Author)

Government Postgraduate College Kot Sultan - Department of Economics ( email )

Kot Sultan
Layyah, Punjab 31650
Pakistan

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