Bivariate and Multivariate Tests of Money-Price Causality: Robust Evidence from a Small Developing Country

This paper is an attempt at re-examining the question of causality between money and prices both in the bivariate and multivariate context of a small developing economy, based on an improved methodology. Pakistan is used as a case study. The study tends to suggest rather strongly that in the case of Pakistan during the period under consideration (1970|71 to 1993|94), contrary to earlier findings, it was price that was the leading variable as the structuralist maintain and not the other way around as the monetarist maintain. © 1997 John Wiley & Sons, Ltd.