ISLAMABAD: To understand the prevalent monetary policy practices in regional countries, the Finance Ministry has decided to conduct a study on the basis of information collected through a survey.
“Representatives from the Finance Ministry, Federal Board of Revenue (FBR) and other departments concerned are sent to attend seminars, workshops, symposiums and other such activities in regional countries to gather more and more information about best monetary practices especially tax, dual tax, levies, duties and others,” a source in the Finance Ministry told Customs Today.
“The survey covers the legal and operational aspects of the monetary policy making and formulation processes instituted in regional countries, however, other sources of information will be used to enrich the analysis,” the source said, adding that due to reliance on availability of primary data and feedback the completion of this study would consume significant amount of time.
“The survey will cover essentially a snapshot of existing monetary policy frameworks in the regional countries to present a comparative analysis of their salient features… and identify areas of improvement,” the source observed, adding that due to scarcity of comparative literature on this topic, it was indeed a challenging task to contrast the monetary policy frameworks of the member countries.
He said that the analysis and observations made in this paper would entirely be those of the working team and would not necessarily represent the views of the State Bank of Pakistan (SBP).
The source said that since the much wider recognition of its role in macroeconomic stabilisation in the 1960s, monetary policy had progressed into a key policy tool to meet economy‘s desired goals, particularly maintaining price stability.
“The recent global financial crisis, however, has challenged this very fundamental role of monetary policy by revealing the fact that price stability on its own does not ensure financial stability, despite having inflation well below the levels which could cause any concern for the economy, the financial crisis erupted and choked the developed economies within a very short span of time,” the source observed.
He said that efforts by these economies, including both conventional and unconventional practices, came to the fore to rescue the economy with limitations on conventional tools, the central banks recourse to unconventional tools, such as monetization of government debt, increased.
The source said that evidence to the success of all these efforts in these developed countries, nevertheless, would be mixed and the use of unconventional tools is considered temporary, but with more countries being attracted to them is keeping the debate alive.
“Nevertheless, the use of monetary policy as a tool to further economic objections still holds a firm ground, regarding monetary policy practices, literature does not suggest any optimal monetary policy regime that suits all economies,” the source said. He added that role and nature of monetary policy could vary from country to country according to their structure and level of development.
