THE RELATIONSHIP AND IMPACT OF MONEY GROWTH AND BUDGET DEFICIT ON INFLATION IN PAKISTAN

This research study investigates the relationship and the effects of budget deficit and money growth on inflation in the case of Pakistan’s economy. The data was gathered from different sectors in Pakistan. The data was collected from yahoo finance, ADB, KSE and State Bank of Pakistan. The period covered by this study is twenty six years starting from 1986-2011. The regression analysis test was used to examine/determine the results that were found/experienced during the research work. In regression analysis ANOVA, correlation of coefficients, and regression model test was used to analyze the results that were applied on the information gathered through secondary sources. The results show that there is a positive association of budget deficit and money growth on inflation. In general the key outcomes indicate that financing and government expenditures could have different effects. Therefore, it is very difficult to differentiate between current and capital expenditures. Budget deficit increase inflation in country and due to this there is decrease in money growth of a country.