Abstract
We present the application of Forecasting and Policy Analysis System (FPAS) for monetary policy analysis in Pakistan. FPAS is a customized Dynamic Stochastic General-Equilibrium model widely used for monetary policy analysis. Over an eight-quarter horizon and in normal times, the inflation forecasting accuracy of the model is found to be superior to combinations of econometric models; while in more turbulent times the FPAS model compares at least as favorably to the alternatives. The model offers various scenario building tools to check robustness of the baseline forecasts.