Economics, Econometrics and Finance
4 years ago

Pakistan's Monetary Policy Fails to Control Inflation, Impacting Economy.

˜The œLahore journal of economics
The Reserve Equation and the Analytics of Pakistan’s Monetary Policy
Rubina Hassan

Paper Summary

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Empirical Analysis

The article analyzes Pakistan's monetary policy from 1985 to 2009. It focuses on how the State Bank of Pakistan manages reserves and uses the t-bill rate to control the exchange rate. The study finds that the t-bill rate is not effectively linked to economic factors, making the policy inconsistent. The SBP targets 4% of total private deposits as free reserves. Open market operations are limited due to concerns about foreign exchange reserves. The growth of certain reserves negatively correlates with inflation, suggesting a lack of focus on controlling inflation since 2005.