MONETARY POLICY AND THEIR IMPACT ON GDP GROWTH (A CASE STUDY OF PAKISTAN FROM 2014 TO 2023)

Abstract

Inflationary trend is one the main economic conditions which represent the economic growth and stability of the country. An average rise of 2 to 3 percent in prices shows a positive growth of the country. But the rapid rise in prices of goods and services are very dangerous because they snatch the purchasing power of the people. This research paper includes inflationary trends in Pakistan from 2014 to 2023. Secondly, the data of monetary policy tools like Interest rate and money supply (M2) has been collected to show its impact on inflation and GDP growth rate in Pakistan. Here, the GDP growth rate has been taken as dependent variable, while interest rate, money supply and inflation are taken as independent variables. The research goes ahead to find out the impacts of monetary tools and inflation on the GDP growth rate of Pakistan in these 10 years. Through regression analysis it has been concluded that Interest rate has positive relationship with the GDP Growth of the country. Though it is nearly 0.51% increase in GDP growth with 1 percent increase in interest. While, Money supply growth has much positive impact on GDP growth of Pakistan. It is nearly 0.98% increase in GDP growth by increasing 1% of Money Supply.