Mubarik 2005 estimates the threshold level of

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Mubarik (2005) estimates the threshold level of inflation in Pakistan using annual data for the period 1973 to 2000.The empirical results from his study suggest 9 percent threshold level of inflation for the economy of Pakistan, above which inflation is very unfavorable for economic growth. The study follows the work of Khan and Senhadji (2001) in which they calculate threshold level for both the developing, including Pakistan, and developed economies. They use panel data for 140 developing and developed economies for the period 1960 to 1998 and suggest threshold levels,1-3 percent and 7-11 percent, for both group of countries respectively.
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Muhammad Ayyoub, Imran Sharif Chaudhry, Fatima Farooq 55 Hussain (2005) finds no definite threshold level of inflation for Pakistan and just suggests that 4-6 percent range of inflation is tolerable for economy of Pakistan. This study shows similar results with Singh (2003) which recommends 4-7 percent range of inflation for India. The researcher contradicts with Mubarik (2005) as 9 percent threshold level for Pakistan appears to be on the very high side. He also follows the methodology used by Khan and Senhadji (2001) and Singh (2003) and advises the central bank authorities to keep the inflation low and stable, irrespective of any threshold level. Khan and Schimmelpfenning (2006) construct a simple inflation model taking data of economy of Pakistan for the period January 1998 to June 2005 and find that monetary factors determine inflation in Pakistan. They examine long run relationship between the CPI and private sector credit and their results show that there may be no trade-off between inflation and growth in the short run but it certainly exists in the medium and long run. Their estimated results suggest 5 percent inflation target for sustained economic growth and macroeconomic stability for the economy. Kemal (2006) finds that an increase in money supply over the long-run becomes the source of inflation and thus verifies the quantity theory of money .The results drawn by Khan and Schimmelpfenning (2006) have also been verified in the sense that the long- run excess money supply is the main responsible for inflation in Pakistan. This study contradicts with Hussain (2005) as its results imply that inflation in Pakistan is a monetary phenomenon. Munir et al. (2009) analyze the non linear relationship between inflation level and economic growth rate for the period 1970-2005 in the economy of Malaysia. Using annual data and applying new endogenous threshold autoregressive (TAR) models proposed by Hansen (2000), they find an inflation threshold value existing for Malaysia and verify the view that the relationship between inflation rate and economic growth is nonlinear. The estimated threshold regression model suggests 3.89 percent as the structural break point of inflation above which inflation significantly hurts growth rate of real GDP. In addition, below the threshold level, there is statistical significant positive relationship between inflation rate and growth.
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