Analyzing the Impact of Money Supply and Economic Growth on Inflation in SAARC Countries (2000-2020)

Seyed Abdul Hamid Sabet; Mustafa Ibrahimi

doi:10.55544/ijrah.5.1.1

Authors

Seyed Abdul Hamid Sabet Assistant Professor, Faculty Member of Al-Mustafa International University, Qom, IRAN
Mustafa Ibrahimi Faculty Member, Economics Faculty, Kateb University, Kabul, AFGHANISTAN.

DOI:

https://doi.org/10.55544/ijrah.5.1.1

Keywords:

Inflation, Economic Growth, Money, Money Supply, Panel Data

Abstract

Inflation is one of the variables that not only concerns economists but also garners attention from policymakers due to its social impacts and consequences. Policymakers and economists closely monitor and analyze its fluctuations. Identifying the causes of inflation is a critical step in combating it; without correctly identifying the underlying causes, efforts to address inflation may be misguided. Furthermore, effective inflation control and managing persistent price increases require a comprehensive understanding of its effects and consequences.

This study examines the impact of money supply and economic growth on the general price level in SAARC countries during the period 2000–2020 using panel data methodology. The research seeks to answer the question: What has been the effect of money supply and economic growth on the general price level in SAARC countries from 2000 to 2020? To address this question, the hypothesis tested posits that money supply and economic growth have a positive and significant effect on price levels.

The findings of the research confirm this hypothesis, indicating that an increase in money supply leads to a rise in the general price level and inflation. Moreover, the velocity of money has a negative and significant effect on inflation, while economic growth does not have a significant impact on the general price level.

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