Pakistan: Breaking Out of Stagflation into Sustained Growth
Keywords:
Economic Growth, Supply Shock, Pakistan.Abstract
This paper proposes that the underlying cause of the macroeconomic problems facing Pakistan today are a series of supply shocks which have constrained output growth. It is argued that while the current debate has solely focused on government expenditures and revenues, it is critical to also address the acute energy shortages which is constraining supply. The paper goes on to present four recommendations for breaking out of the present stagflation: (i) prudent macroeconomic management, (ii) reviving the role of the government in development while restoring fiscal balance, (iii) loosening monetary policy in order to spur the private sector, and (iv) improving social safety nets.
References
Ahmad, M. (2011). An economic crisis state? In M. Lodhi (Ed.), Pakistan: Beyond a crisis state. Karachi, Pakistan: Oxford University Press.
Amjad, R., & Din, M. (2010). Economic and social impact of global financial crisis: Implications for macroeconomic and development policies in South Asia. Islamabad, Pakistan: Pakistan Institute of Development Economics.
Amjad, R., Din, M., & Khawaja, I. (2011). PIDE budget viewpoint 2011–2012: Breaking out of stagflation—A three-point strategy. Islamabad, Pakistan: Pakistan Institute of Development Economics.
Arif, G. M., & Iqbal, N. (2009). Infrastructure and poverty nexus: The case of rural Pakistan. In Socioeconomic Challenges faced by Pakistan: Proceedings of the National Conference. Islamabad, Pakistan: International Islamic University.
Barsky, R. B., & Kilian, L. (2002). Do we really know that oil caused the Great Stagflation? A monetary alternative. In Macroeconomics Annual 2001. Cambridge, MA: National Bureau of Economic Research.
Beaconhouse National University. (2011). Fourth annual report on the state of the economy. Lahore, Pakistan: Institute of Public Policy.
Blinder, S. (1979). Economic policy and the Great Stagflation. New York, NY: Academic Press.
Brunner, K., Cukierman, A., & Meltzer, A. H. (1980). Stagflation, persistent unemployment and the permanence of economic shocks. Journal of Monetary Economics, 6, 467–492.
Bruno, M., & Sachs, J. D. (1979). Supply vs. demand: Approaches to the problem of stagflation (Working Paper No. 382). Cambridge, MA: National Bureau of Economic Research.
Government of Pakistan. (n.d.). Pakistan Economic Survey (Various issues). Islamabad.
Government of Pakistan. (2008). Panel of economists: Interim report—Economic stabilization with a human face. Islamabad, Pakistan: Planning Commission.
Haque, I. (2010). Pakistan: Causes and management of the 2008 economic crisis (Global Economic Series No. 22). Penang, Malaysia: Third World Network.
International Monetary Fund. (2008). Pakistan: Request for stand-by arrangement (Country Report No. 08/364). Islamabad, Pakistan: Author. Retrieved from http://www.imf.org/external/pubs/ft/scr/2008/cr08364.pdf
Khan, M. A., & Qayyum, A. (2007). Trade, financial and growth nexus in Pakistan. Economic Analysis Working Papers, 6(14).
Khan, S. (2007). Channels and lags in effects of monetary policy’s transmission mechanism: A case of Pakistan. Unpublished PhD dissertation, Pakistan Institute of Development Economics, Islamabad.
Qayyum, A., Khan, S., & Khawaja, M. I. (2007). Interest rate pass-through in Pakistan: Evidence from transfer function approach. Pakistan Development Review, 44(4), 975–1001.
Sargent, T. J. (1988). The role of monetary policy under US institutions. In
A. Anderson & D. J. Bark (Eds.), Thinking about America: The United
States in the 1990s (pp. 311–322). Stanford, CA: Hoover Institution.
