Imports and government spending drive inflation in Pakistan, not just monetary policy.
The study looked at how different economic factors affect inflation in Pakistan from 1973 to 2017. They used a method called ordinary least squares and found that real GDP, money supply, imports, government spending, and past inflation all increase inflation. On the other hand, interest rates decrease inflation. Money supply and inflation affect each other, while government spending and imports cause inflation. This means that inflation in Pakistan is not just about how much money is circulating, but also about imports and government spending. The study suggests that the government needs to control its spending to stabilize prices, not just change monetary policies.