@ above, first of all give reference of this statement of your that time lag in pakistan is two years? any empirical time series study using appropriate technique and published in some good impact factor journal showing for pakistan economy 2 year time lag. Because if time lag involved is two year inpakistan strict monetary stance would have failed to control inflation in 2009. from over 20% to single digit. (lets make the high base effect argument constant for a while in the computation). so kindly qoute 2,3 studies in some recognized journals to prove that it takes 2 years for DR to impact inflation.

Too high interest rate no doubt increases cost of business, let me further add, it causes NPL, but does it means, that; we should lower it to such an extent that their is excessive lending?. If there is excessive growth of money supply, how is it possible that inflation doesn't emerge. Too high interest rate no doubt makes cost of bussines high and it reduces growth of manufacturing no doubt in it. but we cannot make it that much low, that real rate of interest becomes negative in future.

You further overlooked what about having Negative rate of interest? if inflation is 20% and i=10 then real rate of interest is negative as it was in 2008-09.then what?


I agree to your steps no 2 , 3.

Secondly, how will you reduce unemployment in pakistan by growth. Take last ten year data of growth and unemployment and you will find "job less" growth.

Lastly, sir, all your arguments come to failure at one possibility. What about pessimissm or optimism inthe economy?if there is pessimissm in economy, any attempt to augment i, will fail to increase investment.

counter argument, if you say our situation is optimistic, then if i is such high then why not people from all over world come to pakistan and earn profits by lending at v high i in pakistan?

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"any attempt to augment i, will fail to increase investment" is typing error. any effort to augment growth by reducing interest, will fail to increase investment.