Inflationary trends in Pakistan.

Byline: AIMAN QAMAR

The issue of price stability is critical for any economy. Everyone in society is affected by inflation. Macroeconomic policies are primarily concerned with achieving optimal and stable economic growth while maintaining low inflation. In April 2021, the current CPI inflation rate in Pakistan was 11.0 percent year on year. Inflation has a negative impact on the economy's overall growth. The impact of the money supply, GDP, oil prices and exchange rate on the rate of inflation in Pakistan where detection of financial market bubbles is critical because they have a long-term influence on every area of the economy, resulting in significant losses.

In Pakistan, price levels have fluctuated dramatically, harmed economic efficiency and inflation rates are typically high. As a result, it is critical to recognize inflation bubbles to determine whether the increase in inflation is due to demand or to prevalent pricing exuberant behavior that results in a sudden increase in inflation. In Pakistan's economy, a negative and strong inflation growth link has been discovered representing persistent inflation that have negative impact on the economy's GDP growth.

Economists and policymakers are frequently interested in the patterns and correlations of the inflation rate, interest rate, literacy rate, and unemployment rate, which can aid in analyzing a country's economic growth. Inflation occurs when the supply of money exceeds the demand for it, or when the prices of goods rise steadily. Inflation frequently has negative effects for people's purchasing power, macroeconomic instabilities, and overvalued currency rates, all of which have a detrimental impact on exports.

When making price-setting decisions or negotiating for salaries, the degree of inflation has a vital effect. Variations in the availability of products and services used as inputs in manufacturing have an impact on the final price of goods and services in the economy, resulting in price changes.

The basic goal is to achieve high and sustained economic growth with low inflation. As a result, for many years, inflation has been one of the most studied problems in macroeconomics due to its substantial implications for growth and income inequality. The factors that determine inflation rates have long been a hot topic of discussion around the world. Demand-pull inflation is caused by an increase in aggregate demand, whereas supply shocks are expected to create 'cost-push...