The present study investigated the impact of monetary policy and globalization on inflation. The study utilized an updated measure of globalization along with two other dimensions i.e., de facto and de jure measure of globalization to examine the nature of the globalization-inflation relationship. It measures the impact of monetary policy variables on inflation, ignoring random shocks as these are considered minor fractions for the inconsistency of the policy instruments. The study also used the Hodrick Prescott filter to calculate the domestic output gap to assess the notion that the changes in the domestic output gap are still relevant to inflation variations in the presence of globalization. Structural modeling of dynamic heterogeneous panel data estimation technique, which accounts for endogeneity and serial correlation issues has also been employed. The results of the study confirm that both global and domestic factors have significant and descriptive power for domestic inflation. Furthermore, the interest rate is found to be a major nominal anchor to affect inflation. The results of panel causality showed that there exists bidirectional causality from inflation to interest rate, while mixed results were found for analyzing monetary aggregates, exchange rate, globalization, and domestic output gap relationships.

The aim of the present study is to investigate the long run impact of monetary policy and globalization on inflation in the selected South and South East Asian countries. The study measures the impact of monetary policy variables on inflation, ignoring random shocks as these are considered fewer fractions for the inconsistency of the policy instruments. Two exclusive dimensions, defacto and dejure measure of globalization, are taken into account. The study also employed Hodrick Prescott filter to calculate the domestic output gap in order to assess that still changes in domestic output gap is relevant to inflation variation. It employed structural modeling dynamic heterogeneous Panel data estimation technique, which accounts for endogeneity and serial correlation issues. The results of the study confirm that both global and domestic factors have significant and descriptive power for domestic inflation and interest rate is found to be a best nominal anchor to effect inflation.

To attain sustainable economic growth stability in prices is considered as the key instrument. The SBP is considering interest rate targeting as most suitable strategy to control price instability in Pakistan. Present research will make analysis of interest rate targeting in the country. The study empirically investigates long and short run impact of interest rate targeting on inflation. Estimated outcomes of present research indicate the significance of interest rate targeting for the country. Inflation rate is considered as dependent variable. Main proposed variable to influence inflation is interest rate. The controlled variable of present research is real GDP growth. Annual data covering the period from 1980-2019 has been used. The techniques of Autoregressive Distributed Lag Model and pair wise causality approach to assess the nature of causation among variables have been used. The results of the study propose that interest rate is best instrument to achieve target of less volatile prices in economy.