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Monetary Policy In Pakistan

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Chapter No. 1 INTRODUCTION 1.1 Background of the Study and Problem Statement
Economic Policies are aimed to enhance the welfare of general public. Economic policies are of three types i-e Monetary Policy, Fiscal Policy and Commercial Policy. The present study focuses upon the concept and effectiveness of Monetary Policy in Pakistan. Developing countries like Pakistan have plenty of natural and human resources but they are caught up by the mis-management and underutilization of these resources. Pakistan has been facing similar issues which has led its economic …show more content…

During the two fluctuating years, i-e 1970-71 and 1971-72, there was a structural imbalance in economic conditions of Pakistan and growth rate fell up to 1.2 percent, as a result demand was increased leading to rise in price level. The marginal rise in inflation was 2.3 percent during these two years. During 1973-79, the annual financial growth was reached up to 20 percent which had been described in the form of a rise in general price level (Pakistan Business Review; July, 2005 p.p 13-14).
In the starting time of 1980s monetary powers in Pakistan reduced to nullify the fixed exchange rate system. While in the end of 1980s, financial institutions such as International Monetary Fund (IMF) and World Bank (WB) helped out the monetary authorities for enhancement of reforms regarding financial sector. According to State Bank of Pakistan (SBP), target rates of inflation and unemployment are the real goals of monetary policy. (Qayyum …show more content…

In the developed countries, monetary policy is regarded just as the variation in policy indicators i-e interest rate, but in developing nations like Pakistan, SBP focuses upon a wide variety of policy indicators because they want to attain lot of objectives through the implementation of a finest monetary policy (Bhattacharyya, 2012).
When money supply changes, its price i-e interest rate is also affected. Although, saving and investment, both are functions of interest rate, so they are also influenced. The effects of monetary policy on unemployment differ from nation to nation. Unluckily, like many other developing countries, Pakistan has very limited study material and literature over the association between monetary policy and unemployment.
Despite this indecisiveness, it is generally believed that monetary policy has certain impact on unemployment in Pakistan. In developing countries, central banks usually focus upon the economic stability, so the obligation of executing the goals of an optimal monetary transmission mechanism and full employment is put on the

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