"THE IMPACT OF TIGHT MONETARY POLICY ON ECONOMIC GROWTH OF PAKISTAN”

Abstract

The research focuses on the impact of the Tight Monetary Policy on the economic growth of Pakistan and also investigates why this policy is failed to create economic business environment. The objective of monetary policy is to create economic business environment, price stability, manage the balance of payment, lowering unemployment and economic growth. Monetary Policy is of two types “Tight Monetary Policy” (Contractionary Policy) or “Easy Monetary Policy”. When the inflation rate is high, and supply of money increases, the Contractionary Monetary Policy uses to control over inflation, reduce the money supply, stable price level by increasing the interest rate. And when the Government wishes to increase the money supply at that time expansionary monetary policy used. In Pakistan, State Bank followed the Tight Monetary Policy for controlling the inflation, reduce money supply, maintain the price level and improve the growth rate. These are the basic objectives of monetary policy followed in Pakistan. The Tight Monetary Policy has both positive and negative impact on economy; for Pakistan the later one has great impact on its Economic Growth. From the last few consecutive years the Pakistan’s Economic is on continual declining from bad to worse. I conduct this research to find out the causes of failing Tight Monetary Policy. During the research also find out that alone Tight Monetary Policy is not solution for Economic Growth. For this research I made the questionnaire for survey. I took 50 sample size respondents which are selected from the whole population, and also conduct some interviews and on the basis of respondents answers I conclude my research.