| Abstract: |
This paper is an attempt to revisit the pioneering work of Riazuddin and Khan
(2002). A complete business cycle has been elapsed (2002-2010) since their
study, so there is need to review the results with additional information.
This revisited attempt, based on a theoretically specified framework, arrived
at similar results and found significant impact of Islamic calendar. The
Islamic months of Ramadan and Zilhaj have positive impact on currency holdings
and negative impact on deposits. Although stylized facts indicate that
consumer prices are significantly higher during Ramadan but econometric
investigation rejects the upward exogenous shifts in prices during Ramadan.
Therefore, structural relationship analyzed in co-integration framework has
shown that inflation is not directly impacted by the Ramadan but indirectly
through increase in its determinants. Inflationary tendencies during Ramadan
are not due to exogenous increase by producers and retailers but possibly due
to demand surge in the wake of redistribution of income. The months of June
and December have positive effects on deposits and negative effects on
currency in circulation indicating the presence of window dressing. Finally,
as seasonal factors have important role in determining economic time series,
therefore, ignoring those in monthly time series models will lead to omitted
variable bias and inappropriate forecasts. |