Stagflation and it's prevalence in Pakistan — Omer Javed

This policy inclination – both local and one suggested in IMF programs towards over-relying on policy rate on curtailing aggregate demand, is indeed a disproportionate response to correctly and effectively addressing inflation and low growth challenge. Pakistan, therefore, needs a balanced monetary and fiscal policy response to tackle the issues of stagflation. The policy should focus on both the aggregate – demand and supply sides. This will also help bring a much-needed boost in the employment levels.

It would make sense, at the same time, to borrow from the unconventional economic policy of the type of modern monetary theory, and political-economic and heterodox institutional and behavioral economics. Overall as well, global prevalence of stagflation requires a policy response on similar lines as indicated above. Monetary policy alone, or when given a disproportionate role in tackling stagflationary concerns, will not work as has been indicated the time and again over the last four decades or so.

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Stagflation and it's prevalence in Pakistan

Dr. Omer Javed | institutional political economist