High inflation in Pakistan doesn't deter domestic consumption, study finds.
The article presents a model to understand how the economy of Pakistan behaves. They used a method called DSGE and found that high inflation doesn't affect domestic spending much. When inflation is high, the central bank raises interest rates. The exchange rate goes up when there is high inflation, and tight monetary policy helps control inflation but also raises the exchange rate. The impact of the exchange rate on inflation is low, and about a quarter of domestic firms don't change their prices for about two quarters.