Does Pakistan Need To Adopt Inflation Targeting? Some Questions

Jesus Felipe ()

SBP Research Bulletin, 2009, vol. 5, 113-162

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.

Keywords: inflation targeting; money demand function; monetary policy regime (search for similar items in EconPapers)
JEL-codes: E3 E31 E52 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (6)

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