This study investigates the effects of political instability on inflation in Pakistan. Applying the Generalized Method of Moments and using data from 1951-2007, we examine this link in two different models. The results of the ‘monetary’ model suggest that the effects of monetary determinants...

The hybrid New Keynesian Phillips curve has been criticized for lacking a micro-foundation. In this paper, an alternative purely forward-looking model of the Phillips curve is constructed on the basis of a micro-foundation of trend inflation. In addition, another source of output gaps other than...

In this paper, I present a unified and micro-founded explanation for various types of inflation without assuming ad hoc frictions or irrationality. The explanation is similar to the conventional inflation theory in the sense that an independent central bank can control inflation and also similar...

Recently, it has been argued that trend inflation may be the solution to the puzzle of inflation persistence in the New Keynesian Phillips curve (NKPC). However, incorporating trend inflation into the NKPC raises another serious problem—it lacks a microfoundation. The paper presents a...

This paper calculates differences in welfare costs of nominal rigidities in large and small EMU countries. I use a two-country DSGE model characterized by optimizing agents, monopolistic wage and price setting, distortionary taxes and government debt dynamics. I find that these costs are...

This paper elaborates on the economic operating system (EOS) the role it can play in growth. It focuses on markets, price determination and forces of demand and supply in order to illustrate how an EOS model offers greater economic growth, stability and safety. This paper delves into market...

Much empirical evidence finds that governments react to fiscal imbalances in a non-linear way, through an increasing marginal response of primary surpluses to changes in debt. This paper shows that non-linear fiscal regimes alter equilibria under active and passive monetary-fiscal policies. The...

This paper theoretically examines a way out of the euro crisis based on a model of inflation acceleration and differentials. The conclusion is that, unless more advantaged states (e.g., Germany) systematically transfer a necessary amount of money to less advantaged states (e.g., Greece) in every...

This paper presents a theoretical model with micro-foundations that captures some important features of Pakistan's economy which have emerged in sixty-four years of its history. A comparison of Pakistan’s economic performance during different regimes shows that macroeconomic fundamentals tend...

Chronic inflation is argued to be politically destabilizing. We examine data on inflation and political instability that goes as far back as 500 years. Although the behavior of both prices and political rebellion have changed over these five centuries, and enduring relationship between price and...