Impact of Cost-Push and Monetary Factors on GDP Deflator: Empirical Evidence from the Economy of Pakistan

Abstract

The central objective of this paper is to find the validity of cost-push and monetary factors on GDP deflator through empirical analysis. The empirical analysis has been conducted by using the technique of Ordinary Least Square using annual data for the period from 1971-72 to 2006-07. Before applying OLS the stationarity of the data was checked by Augmented Dickey Fuller (ADF) test. Regression analysis proves that both cost-push and monetary factors are influenced on wholesale price index. The monetary variables have significant impact on GDP deflator.. There is no single remedy to control the raise of wholesale price index. Government should adopt multipurpose strategy such as improvement in tax and revenue structure, improving fiscal and monetary discipline, removing supply side disruptions, eradication of anti-competitive market practice.