External Monetary Constraints Imposed by Developed Economies on Developing Economies: Empirical Evidence from Pakistan

Abstract

The problem with the most of the developing economies is that their monetary policy is constrained by external shocks and developed economies central banks especially FED and ECB. In this research, we examine the effects of major external shocks like global oil price shocks, foreign interest rate shocks and global food price shocks on the major macro variables of Pakistan which creating hurdles for the SBP to achieve its monetary policy objectives independently. The results stating that the global oil price and global food price shocks have direct impacts on the major macro variables of Pakistan and put inflationary pressure on the Pakistan economy which making difficult for the central bank to achieve its predetermined dual objective of monetary policy i.e. full employment and stable inflation. Additionally, we examine how the changes in US monetary policy effects Pakistan economy and find that positive foreign interest rate shock has minor impacts on the major macro variables of Pakistan except for the exchange rate and domestic inflation rates which is also imposing an external constraint on the monetary policymaking process of Pakistan central bank. In a nutshell, all these external shocks are creating hurdles and imposing monetary constraints on the Pakistan which making difficulties for Pakistani central bank to achieve its monetary policy objectives. Contribution/ Originality:In this research, we examine the effects of key external shocks like global oil price shocks, foreign interest rate shocks and global food price shocks on the major macro variables of Pakistan which creating hurdles for the State Bank of Pakistan (SBP) to achieve its monetary policy objectives independently.

Effect of Product Development and Standard Product to Performance of Ecotourism: Case of Ranong Province, Thailand

“…Moreover, historical places help to understand about the evolution of human civilization. Hence historical places have significant important particularly for the regions where these places are present (Hewitt et al, 2020;Rizwan, Younas, Zahra, & Jamil, 2020). It will not be wrong to say that historical places are the investment made by elders of a particular place and time in earlier time that are yielding profits for their present rulers.…”