An Introduction to Monetary Policy Framework in Pakistan: Instruments, Objectives, and Mechanism

  • Muhammad Abdul Rehman Shah University of Engineering & Technology, (UET) Taxila, Pakistan
  • Kashif Raza The Islamia University of Bahawalpur, Pakistan
  • Manzoor Ahmad Alazhari HITEC University Taxila, Pakistan
  • M. Umar Farooq Government College University (GCU) Faisalabad, Pakistan
Keywords: Monetary Policy, Monetary Instruments, State Bank of Pakistan, SBP, Central Banking, Policy Rate, Pakistan Economy

Abstract

In an economy, a central bank's behavior in formulating monetary policy is characterized by some specific actions. These actions meet the complex process of decisions about how a central bank regulates its policy instruments responding to the macroeconomic environment. In the case of Pakistan, the State Bank of Pakistan (SBP) has the mandate to regulate the monetary and credit system through a variety of monetary policy instruments and implementation mechanisms. Despite empirical studies on the subject, the monetary policy mechanism of SBP is comparatively less explored by connecting the policy stances to financial markets. We present a comprehensive review of the framework of monetary policy with modern monetary policy instruments. This study is equally important for researchers, investors, and bankers an insight into procedures of monetary policy of SBP. Similarly, it also helps stakeholders of the corporate sector and SMEs to allocate their resources efficiently after knowing the policy mechanism of the central bank.

Author Biography

Kashif Raza, The Islamia University of Bahawalpur, Pakistan

Lecturer

Department of Economics, Bahawalnagar Campus

Published
2018-12-31
How to Cite
Shah, M. A. R., Raza, K., Alazhari, M. A., & Farooq, M. U. (2018). An Introduction to Monetary Policy Framework in Pakistan: Instruments, Objectives, and Mechanism. Pakistan Journal of Economic Studies, 1(2), 111-129. Retrieved from https://journals.iub.edu.pk/index.php/pjes/article/view/323