This paper is part of efforts to develop macroeconometric model for Pakistan (MMP). This
paper is an initial attempt to develop a small size macroeconometric model to foresee the
effects of monetary policy through forecasting and simulations. We present the basic structure
of macroeconometric model for Pakistan. This is a small-size model comprising 17 equations,
out of which 11 are behavioral equations while the rest are either identities or definitional
equations. OLS method is used to estimate the behavioral equations by using annual data
from FY73-FY06. We provide the estimation results and results of policy simulations to
quantify the impact of shocks to various exogenous variables