Author/Authors :
GHAURI, SAGHIR PERVAIZ State Bank of Pakistan, Pakistan , GHAURI, SAGHIR PERVAIZ Pakistan Institute of Development Economics, Pakistan , QAYYUM, ABDUL Pakistan Institute of Development Economics, Pakistan , QAYYUM, ABDUL State Bank of Pakistan, Pakistan , ARBY, MUHAMMAD FAROOQ Pakistan Institute of Development Economics, Pakistan , ARBY, MUHAMMAD FAROOQ State Bank of Pakistan, Pakistan
Abstract :
The paper examines the behavior of price setting agents as reflected in relative price changes in response to demand and supply factors. We have followed Parks (1978) model on monthly data of consumer price index of Pakistan. Results show that relative price variability is determined mainly by supply factors, as reflected by unanticipated inflation. The demand factors (i.e., changes in real income) are found insignificant in determining relative price variability.
Keywords :
Anticipated inflation , Unanticipated inflation , Relative price variability , Macroeconomic framework
