Introduction: Background, Aims, and Objectives
After the financial crisis of 2008, the economies across the globe suffered in varying patterns according to their prevailing frameworks. The effects of the crisis on countries and how they tackled the crisis were also dynamic across the world. Most countries adopted a tight monetary and fiscal policy after the crisis. Pakistan, being a developing country also adopted a tight monetary policy, but the patterns of policies and other financial indicators varied over the last few years (Ha & Kang, 2015). The aim of the report is to analyze the monetary policy of Pakistan after the recent financial crisis and see how it tackled the situation including issues like inflation, interest rate, unemployment, etc. The objectives are:
- To analyze the monetary policy of Pakistan post recent financial crisis.
- To monitor how the policy was designed to tackle the crisis.
- To draw a logical inference from the analysis and provide recommendations.
(Pennings, et al., 2015), reported in their study that monetary policy and its changes have a lot to do with the exchange and interest rate in the country. If the monetary policy is designed with at least 1% increase in the official interest rate, it results in the appreciation of exchange rate by approximately 1% and also reduces the stock prices by 0.5%-1%. But on the other hand, these changes are slightly less robust if there is a financial crisis but the effects still prevail.