Department of Economics

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Browsing Department of Economics by Author "Abu N. M. Wahid"

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    Is inflation regressive or progressive? Long run & short run evidence from Pakistan
    (International Journal of Management Studies, 2010) Muhammad Shahbaz; Abu N. M. Wahid; Rukhsana Kalim
    The present paper investigates an answer to a key question “is inflation regressive or progressive?” by utilizing time series data from 1971 up to 2005 with reference to Pakistan. The main focus of the study is on the infl ationinequality puzzle but other control variables are also included in the model that aff ect income distribution. We have utilized the most advanced technique FMOLS (Fully-Modifi ed Ordinary Least Square) for long run and ECM (Error Correction Model) for short run dynamics. Our fi ndings suggest that infl ation is progressive in the case of Pakistan but with low magnitude. There is also a prevalence of a U-shaped relationship between infl ation and income inequality in non-linear or non-monotonic phenomenon, but it is insignifi cant. Per capita income deteriorates income distribution, and seems to provide gains to non-poor individuals in the economy. Remitt ances as share of GDP, and human capital, also appear to increase income inequality in both periods but large size of the government seems to worsen income distribution in the long run. International trade and income inequality are positively correlated that confi rms the existence of Leontief paradox in Pakistan not only in short run, but also in long run. Financial development declines income inequality insignifi cantly. Inverted U-shaped curve (Lafer-Curve) indicates an association of trade and income inequality in non-linear fashion insignifi cantly. This eff ort provides some new insights for policy makers and development planners in Pakistan.