The aim of the present study is to investigate the long run impact of monetary
policy and globalization on inflation in the selected South and South East
Asian countries. The study measures the impact of monetary policy variables on inflation,
ignoring random shocks as these are considered fewer fractions for the inconsistency of the
policy instruments. Two exclusive dimensions, defacto and dejure measure of globalization, are
taken into account. The study also employed Hodrick Prescott filter to calculate the domestic
output gap in order to assess that still changes in domestic output gap is relevant to inflation
variation. It employed structural modeling dynamic heterogeneous Panel data estimation
technique, which accounts for endogeneity and serial correlation issues. The results of the
study confirm that both global and domestic factors have significant and descriptive power for
domestic inflation and interest rate is found to be a best nominal anchor to effect inflation.
1-Arshi Shahid PhD Scholar, Department of Economics, University of the Punjab, Lahore, Punjab, Pakistan.2-Hafiz Khalil Ahmad Professor, Department of Economics, Govt. College Women University, Sialkot, Punjab, Pakistan.3-Saima Liaqat Lecturer, Department of Economics, Lahore College for women university, Jhang Campus, Punjab, Pakistan.
Globalization, Inflation, Monetary Policy, Output Gap