The Impact of Public debt on Inflation in Pakistan

Abstract

This paper explores the impact of public debt on inflation in Pakistan over the period 1986 to 2020 using annual time series data. The study examined the relationship among inflation and public debt using ARDL bounds testing cointegration approach and an ECM model examine this linkage. The co-integrating regression outcome provides the indication of the existence of a stable long-run relationship between inflation and the independent variables. Furthermore, study showed a positive and significant impact of public debt on inflation in the long run where as in the short run the relationship was positive but insignificant. This study does not support the Ricardian framework.