IDEAS home Printed from https://ideas.repec.org/p/sbp/wpaper/104.html
   My bibliography  Save this paper

Estimation of Medium Term Inflation Target for Pakistan

Author

Listed:
  • Fayyaz Hussain

    (State Bank of Pakistan)

  • Dr. Muhammad Rehman

    (State Bank of Pakistan)

Abstract

As a part of its strategic goal, State Bank of Pakistan (SBP) plans to switch to flexible inflation targeting regime. In this regard, the first and most important question is about setting appropriate medium term inflation target. This study aims to search for the medium term inflation target that is conducive for socioeconomic welfare. Seeking guidance from the international best practices, we have used broadly two procedures to search for appropriate inflation target and its band for Pakistan. First, we have analyzed the target setting practices of advanced and emerging inflation targeting economies. Second, we used a variety of technical methods. Results show that inflation level above 8 to 9 percent is harmful for the society. On the lower bound inflation below 4.0 percent is also undesirable. Keeping in mind these findings, inflation target range in the similar emerging economies, history of inflation volatility in Pakistan and importance of exchange rate, we recommend inflation target to be set at 5.5 percent with a band of +/- 1.5

Suggested Citation

  • Fayyaz Hussain & Dr. Muhammad Rehman, 2020. "Estimation of Medium Term Inflation Target for Pakistan," SBP Working Paper Series 104, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:104
    as

    Download full text from publisher

    File URL: https://www.sbp.org.pk/publications/wpapers/2020/wp104.pdf
    File Function: First version, 2020
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • 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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sbp:wpaper:104. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Faisal Saleem (email available below). General contact details of provider: https://edirc.repec.org/data/sbpgvpk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.