INFLATION IN SOUTH ASIA AND IT’S MACRO ECONOMIC LINKAGES
Keywords:
Inflation, Correlation, Money Supply, Macro Economics, VariableAbstract
The objective of this paper is to analyze the consumer price inflation in South Asian Countries from 2000 to 2008. The annual percentage change in CPI and Average Annual Growth Rate in Consumer Price Indices are analyzed to examine the trend of inflation in South Asian Countries like Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan & Sri Lanka. India has average inflation of 5% but Sri Lanka is the hardest hit by the inflation among South Asian countries. Bhutan has very low rate of inflation and Maldives has rising trend of inflation. The inflation rates are co-related with the growth rate of gross domestic product and money supply of South Asian Countries. There is positive co-relation between the rate of inflation and rate of changed in GDP at constant prices in Bangladesh, India, Pakistan, and Sri Lanka but negative co-relation in Nepal. There is negative co-relation between rate of inflation and changes in money supply in Bangladesh, Nepal and Pakistan but positive co-relation in Nepal and Sri Lanka. In Pakistan the consumer price inflation is mainly due to oil price hike and food inflation. So the inflation scenario in South Asia is adverse to economic development as it is above 5% in most of the countries.
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