The thesis seeks to examine the impact of macro-economic conditions, namely GDP and inflation on interest rate pass-through (IRPT) for Pakistan. For this purpose, three sets of analysis are carried out by using monthly time series observations over the period of 2004 to 2015. The impulse response function show that a shock 6 months’ treasury bill rate do not completely transmit to the weighted average lending Hence, there is incomplete interest rate pass-through in Pakistan. Time varying IRPT coefficients are derived by employing recursive analysis to examine the effects of macroeconomic variables on them. VAR result indicates that inflation indeed has positive impact on IRPT because in higher inflationary environment, banks tend to settle their lending rates more to increase their margins. GDP do not significantly affect interest rate passthrough. Pakistan financial market is in developing stage so it often experiences volatility due to market imperfections, this volatility introduces uncertainty in the market. Supervisor:- Dr. Waseem Shahid Malik