Iii objectives of the study keeping in view the above

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III. Objectives of the Study Keeping in view the above presented research, we classify the following study objectives: i) The major objective of the present study is to analyze the impact of inflation on GDP growth in Pakistan. It is to evaluate the GDP growth performance and to assess the historical trends of the inflation in Pakistan ii) To determine and examine the feasible threshold level of inflation for GDP growth. It is needed to explore if the inflation in the time-series caused to reduce the growth of the economy or not. iii) To state the policy implications, keeping in view the statistical significance of the estimated results about inflation and growth relationship and its effects on the economy of Pakistan. IV. The Structure and Trends of Inflation and Growth in Pakistan Much of the inflation in Pakistan is caused by the increase in food prices. It might be due to less productivity of agriculture sector or could be the result of ‘so called’
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56 Pakistan Journal of Social Sciences Vol. 31, No. 1 shortage of goods and services in the economy developed by manufacturing sector’s “giants”. Several supply side and demand side factors could also be responsible for the increase in inflation in Pakistan. Inflation could be the result of shocks to the supply of certain food items and to world oil markets. In addition, fluctuating oil prices in world market could also be, due to rigid wage and price structure, another cause of rise in general price level of almost all other commodities. Rising import prices also considered one important factor affecting the inflation. Depreciating exchange rate in this scenario can also put upward pressure on price level. Similarly, some people blamed indirect taxes for being the main cause of inflation. Wheat support price has also been estimated as an important determinant of inflation in Pakistan. Inflation, result of any factor, hurts the poor more since more than half of the budget of the low income persons is spent for food. It also redistributes income from fixed income earners to owners of assets and earners of large and variable income, such as profits (Hasan et al. 1995 and, Khan and Qasim 1996). Excess money supply is the main factor responsible for inflation in the long run, however at the same time, other factors; including structural problems also influence the rate of inflation (Khan and Schimmelpfennig, 2006). This discussion indicates that inflation and different sectors of the economy of Pakistan are inter-related with each other. Inflation may can cause to increase the productivity of the economy, but at the same time, hyper inflation hurts the growth of all the sectors of Economy. In this section, we are interested to examine the historical trends of inflation and GDP growth rate during the study period. A number of severe fluctuations have been observed in CPI inflation and GDP growth rate for the economy of Pakistan during the period 1972-73 to 2009-10. Negative growth rate of GDP has not been observed in any fiscal year, whereas we are, at the same time, unable to declare it as a steady growth rate for the economy.
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