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THE IMPLICATION OF FISCAL VARIABLES IN THE MONETARY REACTION FUNCTION OF PAKISTAN

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http://dx.doi.org/10.31703/ger.2023(VIII-I).01      10.31703/ger.2023(VIII-I).01      Published : Mar 2023

The Implication of Fiscal Variables in the Monetary Reaction Function of Pakistan

Abstract

    This paper investigates the influence of fiscal variables on the monetary reaction function innPakistan. The main concern of a macroeconomic policy is to achieve sustainable growth and to keep a low level of inflation in the economy. For empirical analysis, the Autoregressive Distributive Lag model (ARDL) is applied using quarterly data for the period 2004Q1 to 2020Q4. The empirical evidence reveals that the monetary policy instrument in the monetary reaction function is explained significantly by the fiscal policy variables both in the short and long-run. Monetary policy independently cannot control inflation unless it has the support of the fiscal policy. Therefore, for an optimal policy mix, a wise monetary policy must be followed by a comprehensive fiscal policy in the case of Pakistan.

    Monetary Policy, Fiscal Policy, Policy Interaction

    (1) Brekhna Ali
    PhD Scholar, Department of Economics, Institute of Management Sciences, Peshawar, KP, Pakistan.
    (2) Mukamil Shah
    Assistant Professor, Department of Economics, Institute of Management Sciences, Peshawar, KP, Pakistan.
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Cite this article

APA

CHICAGO

    CHICAGO : Ali, Brekhna, and Mukamil Shah. 2023. "The Implication of Fiscal Variables in the Monetary Reaction Function of Pakistan." Global Economics Review, VIII (I): 1-16 doi: 10.31703/ger.2023(VIII-I).01

HARVARD

    HARVARD : ALI, B. & SHAH, M. 2023. The Implication of Fiscal Variables in the Monetary Reaction Function of Pakistan. Global Economics Review, VIII, 1-16.

MHRA

    MHRA : Ali, Brekhna, and Mukamil Shah. 2023. "The Implication of Fiscal Variables in the Monetary Reaction Function of Pakistan." Global Economics Review, VIII: 1-16

MLA

    MLA : Ali, Brekhna, and Mukamil Shah. "The Implication of Fiscal Variables in the Monetary Reaction Function of Pakistan." Global Economics Review, VIII.I (2023): 1-16 Print.

OXFORD

    OXFORD : Ali, Brekhna and Shah, Mukamil (2023), "The Implication of Fiscal Variables in the Monetary Reaction Function of Pakistan", Global Economics Review, VIII (I), 1-16

TURABIAN

    TURABIAN : Ali, Brekhna, and Mukamil Shah. "The Implication of Fiscal Variables in the Monetary Reaction Function of Pakistan." Global Economics Review VIII, no. I (2023): 1-16. https://doi.org/10.31703/ger.2023(VIII-I).01