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Does Pakistan Need To Adopt Inflation Targeting? Some Questions

Author

Listed:
  • Jesus Felipe

    (Asian Development Bank)

Abstract

In this paper I consider the broader implications for Pakistan of a shift from the current monetary regime into inflation targeting (IT). To this purpose, I discuss the theoretical foundations of the standard IT model and argue that although most likely Pakistan meets the basic technical requirements to implement some version of it, the State Bank of Pakistan should take into consideration a number of issues before it makes a final decision whether to shift to IT or not. For example, I show that there is no overwhelming empirical evidence that short-term interest rates are inversely related to inflation. Finally, I argue that there are other options available to Pakistan’s central bank such as to target full employment subject to an inflation constraint.

Suggested Citation

  • Jesus Felipe, 2009. "Does Pakistan Need To Adopt Inflation Targeting? Some Questions," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 5, pages 113-162.
    • Handle: RePEc:sbp:journl:38
    as

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    File URL: http://www.sbp.org.pk/research/bulletin/2009/vol5/PakistanInflationTargeting.pdf
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Arshad Khan & Ather Maqsood Ahmed, 2016. "Conducting Monetary Policy in South Asian Economies: An Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(3), pages 161-190.
    2. Aswin Rivai, 2022. "The monetary policy impact on agricultural growth and food prices," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(9), pages 158-165, December.
    3. Zulfiqar Ali WAGAN & Zhang CHEN & Hakimzadi SEELRO & Muhammad Sanaullah SHAH, 2018. "Assessing the effect of monetary policy on agricultural growth and food prices," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 64(11), pages 499-507.
    4. Zafar Hayat & Muhammad Nadim Hanif, 2020. "Assessing the Role of Money versus Interest Rate in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(1), pages 101-114.
    5. Mohsin S. Khan, 2009. "The Design and Conduct of Monetary Policy: Lessons for Pakistan (The Quaid-i-Azam Lecture)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 48(4), pages 337-356.
    6. Zafar Hayat & Saher Masood, 2022. "Inflation Targeting Skepticism: Myth or Reality? A Way Forward for Pakistan (Article)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 61(1), pages 1-27.

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    More about this item

    Keywords

    inflation targeting; money demand function; monetary policy regime;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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