Inflation in Pakistan is driven by both supply and demand shocks. Supply shocks have a slower impact on inflation compared to demand shocks. Supply side disturbances explain 48% of inflation variation, with nominal shocks being more important than real demand shocks. Around 75% of the long-run impact of supply shock on inflation is realized over a one-year period, while 90% of demand shock impact is seen within the same timeframe. This suggests that understanding and managing inflation in Pakistan requires considering both monetary factors and supply side disturbances.