Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach

This research is the earliest attempt to understand impact of inflation and interest rate on output growth in context Pakistan using wavelet transformation approach. For this study, we used monthly data inflation, rate, industrial production from January 1991 May 2020. The COVID-19 pandemic has affected economies around world, especially view measures taken by governmental authorities regarding enforced lockdowns social distancing. Traditional studies empirically explored relationship between these important macroeconomic variables only for short run long run. Firstly, employed autoregressive distributed lag (ARDL) cointegration test two causality tests (Granger Toda–Yamamoto) check properties causal among variables, respectively. After confirming long-run ARDL bound test, decomposed time series growth, into different scales analysis which allows us study very run, medium continuous transform (CWT), cross-wavelet (XWT), coherence (WTC), multi-scale Granger were investigate co-movement nature growth. results show that not same across all horizons; rather, it unidirectional short-run medium-run but bi-directional long-run. Therefore, suggests central bank should try maintain at a low level instead putting too much pressure