IMPACT OF ZERO INTEREST RATE POLICY ON ECONOMY

Abstract

This research paper is focused on how zero interest rate policy on economy impacted main economic indicators. ZIRP vital tool to give direction to the economy Interest rate is the main tool to set the direction of economy or to control die economy.US and Europe are effectively utilizing the zero interest rate come out from the recession. Latest economic numbers are indicating that they are heading toward right direction. Japan is one of the keen user of ZIRP but the question is has they achieved their target by keeping ZIRP? Answer is a big NO. When Japan starts using ZIRP they said we want to grow our economy and also to have inflation in the country as well but it has clearly been observed from the past record of Japan’s economy that they never achieved their target. Japan is lacking as it has not produced significant inflation numbers in the economy yet. But still Japan is aggressively injecting the money in the economy. Impact on Pakistan economy Same tool may be used to push up the Pakistan’s economy. But before implementing this tool, structural issues related to our economy must be sought out on urgent basis, mainly in energy sector and in revenue system of the government. Although the zirp implementation is little difficult but several setups can be made to utilize it effectively by looking dimension associated with it. The results confirming the dimensions related to zirp used in previous studies. In previous studies numbers of dimensions are found such as, Exchange rate, foreign direct investment, inflation, interest rate, GDP, Money Supply, balance of trade and industrial production. This research includes three dimensions impacted by zirp such as Inflation, Unemployment, and Gross Domestic Product. Source of data The research was conducted through primary and secondary data collected from different sources as mentioned in reference section. Like World Bank, State Bank of Pakistan. All the responses were analyzed and based on that recommendation and conclusion has been made.