The size of informal economy in Pakistan

This paper estimates the size of informal economy in Pakistan by using monetary approach with some modifications, electricity consumption approach and MIMIC model. Under monetary approach, we take care of the issue of the stationarity of variables and use autoregressive distributed lag (ARDL) model instead of simple OLS and add education as an additional factor affecting the size of informal economy along with some other technical improvements in the standard monetary models. The electricity consumption approach and MIMIC models are used for the first time in case of Pakistan. The results show that the informal economy in Pakistan has been about 30 percent of the total economy which declined considerably in 2000s. Currently, about 20 percent of the economic transactions are taking place in the informal sector.Informal Economy, ARDL, MIMIC

Quarterisation of national income accounts of Pakistan

Arby (2008) quarterised the production side of annual GDP, and its subsectors, for 1972 to 2005 based on constant prices of 1999-2000 as well as on current prices. This study provides quarterly estimates of (sectoral and overall) gross domestic production in Pakistan during 1999-2000 to 2009-2010 based on constant prices of 1999-2000 as well as on current prices. Seasonality in quarterly gross domestic product in Pakistan mainly arises from agriculture. Furthermore, the study also provides estimates of various components of expenditures side of the GDP for 1972-1973 to 2009-2010 for the first time as far as we know

Quarterisation of national income accounts of Pakistan

Arby (2008) quarterised the production side of annual GDP, and its subsectors, for 1972 to 2005 based on constant prices of 1999-2000 as well as on current prices. This study provides quarterly estimates of (sectoral and overall) gross domestic production in Pakistan during 1999-2000 to 2009-2010 based on constant prices of 1999-2000 as well as on current prices. Seasonality in quarterly gross domestic product in Pakistan mainly arises from agriculture. Furthermore, the study also provides estimates of various components of expenditures side of the GDP for 1972-1973 to 2009-2010 for the first time as far as we know

Evaluating Performance of Inflation Forecasting Models of Pakistan

This study compares the forecasting performance of various models of inflation for a developing country estimated over the period of last two decades. Performance is measured at different forecast horizons (up to 24 months ahead) and for different time periods when inflation is low, high and moderate (in the context of Pakistan economy). Performance is considered relative to the best amongst the three usually used forecast evaluation benchmarks – random walk, ARIMA and AR(1) models. We find forecasts from ARDL modeling and certain combinations of point forecasts better than the best benchmark model, the random walk model, as well as structural VAR and Bayesian VAR models for forecasting inflation for Pakistan. For low inflation regime, upper trimmed average of the point forecasts out performs any model based forecasting for short period of time. For longer period, use of an ARDL model is the best choice. For moderate inflation regime different ways to average various models’ point forecasts turn out to be the best for all inflation forecasting horizons. The most important case of high inflation regime was best forecasted by ARDL approach for all the periods up to 24 months ahead. In overall, we can say that forecasting performance of different approaches is state dependent for the case of developing countries, like Pakistan, where inflation is occasionally high and volatile

Evaluating Performance of Inflation Forecasting Models of Pakistan

This study compares the forecasting performance of various models of inflation for a developing country estimated over the period of last two decades. Performance is measured at different forecast horizons (up to 24 months ahead) and for different time periods when inflation is low, high and moderate (in the context of Pakistan economy). Performance is considered relative to the best amongst the three usually used forecast evaluation benchmarks – random walk, ARIMA and AR(1) models. We find forecasts from ARDL modeling and certain combinations of point forecasts better than the best benchmark model, the random walk model, as well as structural VAR and Bayesian VAR models for forecasting inflation for Pakistan. For low inflation regime, upper trimmed average of the point forecasts out performs any model based forecasting for short period of time. For longer period, use of an ARDL model is the best choice. For moderate inflation regime different ways to average various models’ point forecasts turn out to be the best for all inflation forecasting horizons. The most important case of high inflation regime was best forecasted by ARDL approach for all the periods up to 24 months ahead. In overall, we can say that forecasting performance of different approaches is state dependent for the case of developing countries, like Pakistan, where inflation is occasionally high and volatile

Intrinsic Inflation Persistence in a Developing Country

This study estimates degree of intrinsic inflation persistence in Pakistan using aggregate price index, group level price indices, and individual commodity prices. We find no evidence of a unit root in (MoM) inflation at any level, except for house rent. Using monthly data from 1959 to 2011 we find that the estimate of (overall) inflation persistence is 0.16, which is low but significant. During 2001-2011 (overall) inflation persistence is insignificant. Food inflation does not exhibit any persistence during the last decade. However, the degree of persistence is very high (0.80) and significant for core inflation (NFNE), which weakens slightly (to 0.69) when we account for commodities price shock of 2008. At micro level, the estimated degree of inflation persistence for various groups is found to be relatively higher, in almost 60 percent of the cases, compared to corresponding degree of persistence at aggregate level. This may be because in micro analysis we consider only those commodities for which the estimated degree of inflation persistence is significant

Intrinsic Inflation Persistence in a Developing Country

This study estimates degree of intrinsic inflation persistence in Pakistan using aggregate price index, group level price indices, and individual commodity prices. We find no evidence of a unit root in (MoM) inflation at any level, except for house rent. Using monthly data from 1959 to 2011 we find that the estimate of (overall) inflation persistence is 0.16, which is low but significant. During 2001-2011 (overall) inflation persistence is insignificant. Food inflation does not exhibit any persistence during the last decade. However, the degree of persistence is very high (0.80) and significant for core inflation (NFNE), which weakens slightly (to 0.69) when we account for commodities price shock of 2008. At micro level, the estimated degree of inflation persistence for various groups is found to be relatively higher, in almost 60 percent of the cases, compared to corresponding degree of persistence at aggregate level. This may be because in micro analysis we consider only those commodities for which the estimated degree of inflation persistence is significant

Intrinsic Inflation Persistence in a Developing Country

This study estimates degree of intrinsic inflation persistence in Pakistan using aggregate price index, group level price indices, and individual commodity prices. We find no evidence of a unit root in (MoM) inflation at any level, except for house rent. Using monthly data from 1959 to 2011 we find that the estimate of (overall) inflation persistence is 0.16, which is low but significant. During 2001-2011 (overall) inflation persistence is insignificant. Food inflation does not exhibit any persistence during the last decade. However, the degree of persistence is very high (0.80) and significant for core inflation (NFNE), which weakens slightly (to 0.69) when we account for commodities price shock of 2008. At micro level, the estimated degree of inflation persistence for various groups is found to be relatively higher, in almost 60 percent of the cases, compared to corresponding degree of persistence at aggregate level. This may be because in micro analysis we consider only those commodities for which the estimated degree of inflation persistence is significant

Intrinsic Inflation Persistence in a Developing Country

This study estimates degree of intrinsic inflation persistence in Pakistan using aggregate price index, group level price indices, and individual commodity prices. We find no evidence of a unit root in (MoM) inflation at any level, except for house rent. Using monthly data from 1959 to 2011 we find that the estimate of (overall) inflation persistence is 0.16, which is low but significant. During 2001-2011 (overall) inflation persistence is insignificant. Food inflation does not exhibit any persistence during the last decade. However, the degree of persistence is very high (0.80) and significant for core inflation (NFNE), which weakens slightly (to 0.69) when we account for commodities price shock of 2008. At micro level, the estimated degree of inflation persistence for various groups is found to be relatively higher, in almost 60 percent of the cases, compared to corresponding degree of persistence at aggregate level. This may be because in micro analysis we consider only those commodities for which the estimated degree of inflation persistence is significant