Extremely tired/fatigued of discussing PK monetary policy given we have bigger (structural) fish to fry but reneging since @81shaz published piece yest on how SBP is pushing to focus solely on inflation & resigning itself from focusing on econ growth 1/N https://tribune.com.pk/story/2195341/2-sbp-proposes-changes-law-restrict-role/?amp=1

Have always been a strong advocate of decoupling SBP objectives from the growth targets. Wrote on this last May(pre-Baqir): “.. strong evidence around the ‘neutrality of money,’ which means monetary factors don’t impact real econ growth in the long-run 2/N https://blogs.tribune.com.pk/story/82592/controlling-inflation-why-the-state-bank-of-pakistan-should-be-autonomous/

“..distracts govt from focusing on long-term growth measures such as capital deepening, technology and innovation...Therefore, the objectives of the SBP should be decoupled from the government’s fiscal and growth targets, and instead move towards targeting inflation.” 3/N

Hayat (2017) has done a Pak specific paper on this topic: “SBP Act does not provide any effective guiding framework in terms of monetary policy objectives and mandate. The inflation & growth targets setting strategy of the govt is intrinsically flawed” https://www.pide.org.pk/pdf/PDR/2017/Volume1/31-58.pdf
4/N

Dr. @ajpirzada has done an excellent thread around major literature on inflation targeting in emerging markets (“EM”). Most of this EM literature also takes into account impact of ‘cost-push’ inflation & still comes to the concludes that inflation targeting (“IT”) has benefits 5/N https://twitter.com/ajpirzada/status/1249124412676288513

@ahyanpanjwani also did an excellent thread some time ago on inflation setting rules that discuss how CB should have an aggressive response to ensure there is no runaway inflation (think hyper inflation) which can cause a feedback loop 6/N https://twitter.com/ahyanpanjwani/status/1223817331199168513

As reminded by @UzairYounus today Raghuram Rajan went through a similar dilemma in India when he put in place an IT regime & faced backlash. He was eventually pushed out by the Modi regime for this v.reason. His thoughts on the topic are v.insightful
https://www.bis.org/review/r160628f.htm
7/N

In the end, don’t think there is a one-size fits all approach. Even though there is overwhelming evidence across similar countries of IT working, it would be good to see some alternative perspective backed by research & data over a prolonged period of time 8/N

What I see currently is armchair analysts extrapolating rudimentary econ101 frameworks or journalists sensationalising a new way of working at the behest of rent-seeking businessmen who’ve had it easy. They’ve shamelessly questioned loyalties & scandalised professionals 9/N

Question for @81shaz, why don’t you ask former governors u interviewed on why they didn’t conduct any formal research on pros/cons of inflation targeting during their tenure? Would be surprised given most of them weren’t even trained economists (bankers/‘babus’ don’t count) 10/10