IMPACT OF DEMOGRAPHIC CHANGES ON INFLATION IN PAKISTAN

This study empirically investigates the impact of demographic changes on inflation in Pakistan for the period 1988-2014. The study has used population growth (PG) rate and proportion of middle age working population (MAWP) as indicators of demographic change, and estimated two separate models using these proxies. Based on unit root tests, the study has applied Autoregressive Distributive Lag (ARDL) model. The findings of the study show that PG and MAWP have positive and negative impact on inflation in Pakistan, respectively. The validity of results is supported by standard diagnostic tests and results are found consistent with recent empirical evidence for other countries. No previous empirical study for Pakistan on the subject exists; thus, highlighting the contribution of this study in the literature. The study suggests that demographic factors along with traditional macroeconomic determinants of inflation must be considered for designing effective policies to control inflation in Pakistan.