The political economy of inflation in Pakistan

The hypothesis to be tested in this paper is to explore whether there is any link between political economy and inflation in Pakistan. Inflation has always been a fiercely debated issue and is one of the main objectives of the macroeconomic policies both in developed and developing economies. Governments believe that persistently high inflation can have damaging economic and social consequences. Therefore, monetary and fiscal policies are formulated to combat inflation. This paper explores the major reasons behind inflation in Pakistan and looks at the interplay between economic policies, law, politics and inflation. To summarise, this paper aims to examine the link between political economy and inflation in Pakistan. This study has used the autoregressive distributed lag (ARDL) method to obtain the desired result. It is concluded that the SBP must be free from politics and government intervention in formulation and implementation of monetary policies to eliminate this menace.