The Non-Ricardian Regime and Price Level in Open Economies

The objective of this study is to find out the factors that affect price stability, to investigate how inflation can be influenced by the fiscal strategy of a non-Ricardian regime, and to find out the transparent implementation of policies regarding inflation in the country. For this purpose, this study has collected data from 1976 to 2024, and further applied some econometric techniques such as URT, co-integration, and the ARDL approach to find out the short-run to long-run dynamics. This study found that Pakistan is a developing country and its monetary policy remains under the pressure of budget deficits and political pressure. Thus, the central government may influence the inflation rate in long-term dynamics. Our hypothesis is acceptable according to our results, which show that the non-Ricardian regime of fiscal policy influences the price level in Pakistan.