Econometric Insights into South Asia's Monetary, Output, and Price Dynamics: A Simultaneous Equation Modeling Approach

Authors

  • Asma Awan University of the Punjab, Lahore, Pakistan.
  • Farhan Zaib Nawaz University of the Punjab, Lahore, Pakistan. https://orcid.org/0009-0006-0179-2830
  • Furrukh Bashir Bahauddin Zakariya University, Multan, Pakistan.
  • Anam Khan Bahauddin Zakariya University, Multan, Pakistan.

DOI:

https://doi.org/10.52131/pjhss.2023.1103.0622

Keywords:

Money, Prices, Output, Simultaneous Model, South Asia

Abstract

This study focuses on investigating the simultaneous relationship among money supply, inflation, and output of emerging South Asian countries. Data from seven countries in the South Asian region, spanning from 2000 to 2022, is collected for the analysis. Three variables are considered endogenous: Money Supply, Output, and Inflation. Following the fulfillment of assumptions, we employed the Panel Two-Stage Least Squares (Panel 2SLS) method to examine the relationship between money, output, and prices. The results indicated a significant bidirectional relationship between output and money supply, meaning that a higher money supply is associated with increased output and vice versa. Additionally, a unidirectional empirical relationship is observed between inflation and money supply. As the money supply does impact the output, so neutrality of money does not hold. The study recommends South Asian countries establish a policy framework that cautiously adjusts the money supply, balancing the need to prevent excessive inflation or deflation to maintain sufficient liquidity to support optimal economic output.

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Author Biographies

Asma Awan, University of the Punjab, Lahore, Pakistan.

Assistant Professor, School of Economics

Farhan Zaib Nawaz, University of the Punjab, Lahore, Pakistan.

BS Scholar, School of Economics

Furrukh Bashir, Bahauddin Zakariya University, Multan, Pakistan.

Assistant Professor, School of Economics

Anam Khan, Bahauddin Zakariya University, Multan, Pakistan.

M.Phil. Scholar, School of Economics

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Published

2023-09-21

How to Cite

Awan, A., Nawaz, F. Z., Bashir, F., & Khan, A. (2023). Econometric Insights into South Asia’s Monetary, Output, and Price Dynamics: A Simultaneous Equation Modeling Approach. Pakistan Journal of Humanities and Social Sciences, 11(3), 3396–3407. https://doi.org/10.52131/pjhss.2023.1103.0622

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