Does Monetary Policy Play Effective Role in Controlling Inflation in Pakistan
This paper presented the salient features of current Monetary Policy and its effectiveness to control inflation in Pakistan. The monetary authority was successful in controlling inflation when it successfully controlled the money supply target. The calculation of money supply target needs to be improved to get appropriate target level of M2. It is also concluded that in the recent years SBP failed to control money supply and hence rate of inflation within the set target level. There seems to be a lack of coordination between Fiscal and Monetary Authorities. The understanding of issues regarding monetary policy transmission mechanism, effectiveness of different channels, lag structure of monetary policy changes, magnitude of pass-through of policy changes to inflation and output and nature of relationship amongst, instruments and goals of monetary policy (inflation and output) seems to be lacking and need fresh investigation.
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