Income, Money and Prices in Pakistan: Trends and Interrelationship

This paper attempts to look at the trends in income, money, and prices in Pakistan over the years. In addition, we also look at the components of, as well as interrelationship among, these variables. Annual data from 1949-50 to 1998-99 are used and the period is further divided into five decades. The analyses show a greater expansion in these variables in the 1970s. However, these expansions can be attributed to phenomenal expansions in prices. Real income, on the other hand, improved marginally. Real income expanded significantly in the 1960s and remained stable till the 1980s but significantly declined in the 1990s. This is an alarming situation and requires suitable remedial measures. Similarly, the analyses show a significant decline in NFI in the 1990s. In fact, it has been negative for the last four years indicating capital outflow from the country which is also alarming. The analyses also indicate a significant difference between measures of money, M1 and M2, in the 1990s due to the opening of foreign currency deposits. The opening of foreign currency deposits has also affected the demand deposits and there seems to be shifting of funds between the two deposits. Finally, the correlation analyses indicate a little role of money in changing income as well as prices. On the other hand, money seems to be significantly affected by nominal income, particularly by three years back level of income. Regarding price, it seems to have a small association with money.Income; Money; Prices; Pakistan; Trends; Relationship

Income, Money, and Prices in Pakistan: Trends and Interrelationship

Income, Money, and Prices are important macroeconomic variables which play crucial roles in an economy. There has been a long debate in economics regarding their roles. For example, the Monetarists claim that money plays an active role and leads to changes in income and prices. In other words, changes in income and prices in an economy are mainly caused by the changes in money stocks. The Keynesians, on the other hand, argue that money does not play an active role in changing income and prices. In fact, changes in income cause changes in money stocks via demand for money. Similarly, changes in prices are mainly caused by structural factors. Although there is disagreement among economist on the roles of income, money, and prices as well as their interrelationship, these variables are considered important and large amount of literature in economics deals with these variables. The purpose of this paper is to look at the trends of these variables in Pakistan’s economy over fifty years. We also look at the components of these variables as well as their interrelationship.

The Uruguay Round Agreement: Implications for Pakistan’s Textiles and Clothing Sector

The Uruguay Round (UR), which marked the conclusion of protracted multilateral trade negotiations, resulted in comprehensive agreements on multilateral trade in goods and services within the framework of the General Agreement on Tariffs and Trade (GATT). The newly created World Trade Organisation (WTO) provides an institutional framework that encompasses all the agreements and legal instruments negotiated in the UR as well as the dispute settlement procedures and provisions for the regular monitoring of policies of the member countries. The UR agreement has been widely perceived as constituting a major advance in the process of multilateral liberalisation of trade in goods and services and, when fully implemented, is expected to improve economic efficiency and welfare from the global, national and sectoral standpoints. An important feature of the UR agreement is the incorporation of new sectors like textiles and clothing within the ambit of the GATT/WTO framework. In view of the fact that the textiles and clothing industry is one of the few sectors in which developing countries enjoy a distinct comparative advantage over industrial countries, the UR agreement holds considerable significance for developing economies like Pakistan.

Anwar Shah (ed.). Public Expenditure Analysis. Washington, D. C.: The World Bank, 2005. xxxi+256 pages. Paperback. Price not given.

Public Expenditure Analysis is the 7th edition in the “Public Sector Governance and Accountability Series” edited by Anwar Shah. The book attempts to contribute to public sector reforms by improving governance in the public expenditure analysis—to disburse the benefits to grossroots levels in the developing countries. It deals with the intricate issue of equity in both the tax burdens and public spending and evaluates performance of government in safeguarding the interests of the poor and other disadvantaged groups of the society, such as women, children, and minorities. The eight chapters of the book that consist of papers prepared by distinguished authors systematically develop a framework for a right-based approach to citizen empowerment by creating an institutional design with appropriate rules, restraints, and incentives to make the public sector responsive and accountable to the average voter

S. Akbar Zaidi. Issues in Pakistan’s Economy. Second Edition Revised and Expanded. Karachi: Oxford University Press, 2005. xii+530 Pages. Paperback. Pak. Rs 595.00.

“Issues in Pakistan’s Economy” by S. Akbar Zaidi was first published in 1999. The book provided comprehensive information on different aspects of the economy in Pakistan since independence. The idea of writing this book originated from Oxford University Press as there was no book on the economy of Pakistan to benefit the graduate students, researchers, scholars, academicians, and the general public. The book was prescribed as a standard text book in the area of issues in Pakistan’s economy. It is also used as a standard book on the courses on South Asia’s development, economic history, and political economy of the region. The book became a best seller due to its subject matter. That is why a great need was felt to update the book that forced the author to expand, update, and revise the book and improve the shortcomings left in the previous edition. The Second edition includes a large amount of new research material. Also, the most recent available data have been included in the tables of the text throughout the book. Three new chapters have been added, some of the chapters have been reformulated, and the new arrivals in theory and empirical research have also been incorporated, accordingly. The book under review presents the important issues in the form of boxed text, appendices, chapter summaries, and provides suggested readings to further enhance the knowledge in specific areas. The efforts and the pains of the author in completing this book are highly laudable in producing such a valuable piece of research on economic development in Pakistan over the fifty-seven years to benefit the end users in completing their studies, research work, and policy-oriented assignments

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Impact of Financial Liberalisation and Deregulation on Banking Sector in Pakistan

The study analyses market perception about the performance of Pakistani commercial banks due to financial liberalisation and deregulation measures taken by the central bank over the last two decades. For this purpose, it uses Survey approach. To augment the results of Survey Based Approach, it employs Distribution Free Approach to measure relative cost inefficiencies of commercial banks. Out of 35 commercial banks, 15 banks have been chosen for analysis purpose. Key banking reforms remain helpful in correcting flaws in the banking sector of Pakistan. In particular, privatisation of banks, the deregulation and institutional strengthening measures and switching towards market-based monetary and credit management remain helpful in correcting the prevailing flaws. The cost inefficiency scores of banks also indicate that the efficiency of Pakistani banks have improved during 1990 to 2006. As regards group-wise efficiency estimates, foreign banks are found to be more efficient, followed by private banks, nationalised commercial banks, and privatised banks. The relative high cost inefficiency of privatised banks is most probably due to having remained under state owned structure during most of the period of the study. The financial liberalisation and the resultant competitive environment might be the key factors behind improvements in efficacy of banks.Banking, Efficiency, Regulations, Financial Reforms

Rolf J. Langhammer and Lúcio Vinhas de Souza (eds). Monetary Policy and Macroeconomic Stabilization in Latin America. Heidelberg: Springer-Verlag. 2005. ix+254 pages. Hardback. Price not given.

Monetary Policy plays a crucial role in macroeconomic stabilisation of a country. Latin American countries have faced successive waves of economic instability causing hyper-inflation and currency and financial crises leading to losses in output. This book is a collection of papers presented at the conference on “Monetary Policy and Macroeconomic Stabilization in Latin America”, held at the Kiel Institute for World Economics (IFW), in Kiel, Germany, on September 11-12, 2003. Well-known speakers from major multilateral policy institutions and the monetary authorities of Latin American economies participated in this conference. Graphs and tables throughout the book make for easy understanding of the main findings, as the book focuses on the recent experience of Latin American economies with designing, announcing, and implementing monetary policies with different internal and external anchors. It deals with the exposure of real exogenous shocks, high dollarisation, regulated and segmented labour market, inappropriate policies and monetary institutions, and unrest from deep financial and currency crises. The book draws lessons from European monetary integration for Latin America, and examines the role of financial integration to help reduce the systematic shocks in Latin America

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Ahmed Galal and Nadeem Ul Haque (eds). Fiscal Sustainability in Emerging Markets: International Experience and Implications for Egypt. Cairo/ New York: The Egyptian Center for Economic Studies. 2006. ix+289 pages. Paperback. Price not given.

Fiscal sustainability is required to attain and maintain the long-run steady-state growth in emerging markets, to create fiscal space for rural and urban poverty, to safeguard financial stability, and to achieve the overall Millennium Development Goals. This can be done by providing financial support and by encouraging further research in this area. This book analyses the issues in the context of international experience and its implications for Egypt. It touches on issues of fiscal deficit and public debt sustainability, debt management, efficiency and equity of social expenditure, and public investment, the will and power to achieve civil service reform, and transparency and equitability of the budgetary process. It fills a gap in research