Economic Factor Acting as a Catalyst for the Spreading of Inflation in Pakistan

Abstract

A redistribution of income may be one of the repercussions of inflation on the economy. As prices increase and savings lose value or purchasing power, it punishes savers. Inflation causes the real worth of fixed-value paper assets like annuities, insurance policies, and savings accounts to decrease. Inflation is generally understood to be a continuous and persistent Increase in the overall price level that reduces buying power. In economics, inflation is defined as an increase in an economy's total price level for goods and services. Each currency unit might purchase less goods and services as the overall price level rises; therefore, inflation is linked with a drop in money’s purchasing power. This study aims to examine the impact of the exchange rate, money supply, interest rate and GDP on inflation in Pakistan; this study's nature is quantitative. Secondary date from 1995 to 2022. With the help of E-Views, we use regression method for data analysis. With the help of this study, we can conclude that GDP, exchange rate, interest rate and money supply do not significantly impact inflation in Pakistan. Therefore, our study does not support any of the four tested hypotheses.