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Pakistan: Breaking out of stagflation into sustained growth

By Rashid Amjad, Musleh-ud Din and Abdul Qayyum


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.

Topics: F43 - Economic Growth of Open Economies, P44 - National Income, Product, and Expenditure; Money; Inflation
Year: 2011
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