Abstract
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A reliable estimate of the money supply is an important sign of the Gross Domestic Product (GDP) and many other macroeconomic indicators. It is widely discussed that over a long period of time, there is a strong link between GDP and money supply. This link is significantly important for formation of monetary policy. The main aim of this study is to estimate the income-money supply model for Pakistan. This study estimates the income-money supply model for Pakistan over the period of 2009 to 2019. The study uses Two Stage Least Square (2SLS) econometric technique due to the presence of endogeneity problem in the model under consideration. The existence of simultaneity between money supply (M2) and income (GDP) is also clear from the results of Hausman Specification test for simultaneity between M2 and GDP. The results further show that there exists a strong money-income relationship in case of Pakistan. |
Keywords
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Money Supply, Income, Simultaneous Equations |
Article
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Article # 20
Volume # 2
Issue # 4
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DOI info
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DOI Number: 10.47205/jdss.2021(2-IV)20
DOI Link: http://doi.org/10.47205/jdss.2021(2-IV)20
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