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FINANCIAL SECTOR REFORMS AND INFLATIONGROWTH NEXUS

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16 Pages : 159-169

http://dx.doi.org/10.31703/gssr.2024(IX-III).16      10.31703/gssr.2024(IX-III).16      Published : Sep 2024

Financial Sector Reforms and Inflation-Growth Nexus

Abstract

    In the 1980s, Pakistan's financial reforms reduced central bank borrowing, raising government debt and tax collection needs. In this context, the conventional approach to evaluating the costs and benefits of low inflation proves inadequate. The sacrifice ratio (SR) focuses on demand contraction's impact on economic activity and fails to capture the true costs of inflation by overlooking the supply-side effects of reduced fiscal space. This study re-evaluates the SR, accounting for both the demand contraction channel and the long-term supply side impact of diminished fiscal space. We hypothesize that the cumulative costs outweigh the long-term benefits of price stability. By incorporating fiscal space scenarios into the time-series model for SR estimation; our results indicate an SR approximately double that found in earlier studies. These findings highlight the importance of incorporating fiscal implications into monetary policy decisions to support sustainable economic growth.

    (1) Nadeem Iqbal
    Assistant Professor, Department of Economics, University of Peshawar, KP, Pakistan.
    (2) Aisha Rehman
    PhD Scholar, Department of Economics, University of Peshawar, KP, Pakistan.
    (3) Wasim Shahid Malik
    Professor, Department of Economics, University of Peshawar, KP, Pakistan.
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Cite this article

APA

CHICAGO

    CHICAGO : Iqbal, Nadeem, Aisha Rehman, and Wasim Shahid Malik. 2024. "Financial Sector Reforms and Inflation-Growth Nexus." Global Social Sciences Review, IX (III): 159-169 doi: 10.31703/gssr.2024(IX-III).16

HARVARD

    HARVARD : IQBAL, N., REHMAN, A. & MALIK, W. S. 2024. Financial Sector Reforms and Inflation-Growth Nexus. Global Social Sciences Review, IX, 159-169.

MHRA

    MHRA : Iqbal, Nadeem, Aisha Rehman, and Wasim Shahid Malik. 2024. "Financial Sector Reforms and Inflation-Growth Nexus." Global Social Sciences Review, IX: 159-169

MLA

    MLA : Iqbal, Nadeem, Aisha Rehman, and Wasim Shahid Malik. "Financial Sector Reforms and Inflation-Growth Nexus." Global Social Sciences Review, IX.III (2024): 159-169 Print.

OXFORD

    OXFORD : Iqbal, Nadeem, Rehman, Aisha, and Malik, Wasim Shahid (2024), "Financial Sector Reforms and Inflation-Growth Nexus", Global Social Sciences Review, IX (III), 159-169

TURABIAN

    TURABIAN : Iqbal, Nadeem, Aisha Rehman, and Wasim Shahid Malik. "Financial Sector Reforms and Inflation-Growth Nexus." Global Social Sciences Review IX, no. III (2024): 159-169. https://doi.org/10.31703/gssr.2024(IX-III).16