Monetary Policy at a Crossroads: Assessing the Impact of Gold, Inflation, and Interest Rates on Pakistan's GDP (1990–2024)
Keywords:
Inflation Rate, GDP Growth Rate, policy rate, Gold pricesAbstract
The primary objective of this research is to investigate the impact of gold rates, inflation and policy rate on GDP of Pakistan for the time period ranging from 1990 to 2024 to enable the policy makers to fine tune policy rates in trade-off between inflation control and growth stimulus. This study employs annual time-series data from 1990 to 2024 to analyze the impact of gold prices, inflation rates, and interest rates on Pakistan’s GDP. The study uses multiple linear regression analysis to quantify the relationship between the variables using EVIEWS Software. The study's findings revealed several key findings that challenge conventional economic assumptions while offering new insights into Pakistan’s macroeconomic dynamics. Contrary to expectations, gold prices exhibited a strong positive relationship with GDP, suggesting that gold may play a more complex role in Pakistan’s economy than merely acting as an import-driven drain on foreign reserves. This finding implies that gold’s function as a store of value, collateral in informal lending, and remittance conduit may offset its negative trade balance effects. The study concludes that Pakistan’s economy requires policies tailored to its unique structural realities where gold hoarding buffers crises, inflation’s effects are uneven, and monetary policy transmits asymmetrically. By moving beyond conventional frameworks and embracing context-specific solutions, policymakers can better navigate the trade-offs between stability and growth. This study’s paradoxical findings ultimately highlight the importance of questioning established assumptions and grounding decisions in local empirical evidence rather than imported economic dogmas. The results strongly support the rethinking gold’s role in Pakistan’s economy through monitoring hoarding, redefining inflation management strategies through improving data granularity and recalibrating monetary policy for growth by implementing asymmetric rate adjustments and enhancing coordination with fiscal policy.
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Copyright (c) 2026 Muhammad Naeem Akhtar, Muhammad Hanif
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