The thesis herewith aims to signify the indicators of monetary policy in order to elucidate with a better extent, the transmission mechanism of Pakistani Monetary Policy. Along with that the research presented herewith also encompass the study of how the two particular factors, that are, oil prices and foreign monetary policy affect the local macroeconomic predictors. To serve the purpose structural VAR model with 7 variables is employed; exploiting the time series based data of the respective sector spanned over the period of about 25 years i.e. from 1990 to 2014. The relationships among the variables are explained using variance decompositions and impulse response functions. The findings of this thesis suggest that the movement of economic variables is better explained via interest rate shocks as compared to the exchange rate and monetary aggregate shocks. In addition to that, this research also indicates that strategically it would be better for Pakistani economy to maintain focus over the reserve money rather than hovering over narrow/broad money. Moreover, the outcome of this research also exhibits that the local economy does not seem to be affected by either of the aforementioned factors (international oil prices or foreign monetary policy). However, the presence of oil price in the model (SVAR) assisted in controlling the puzzles that generally arise in the conventional literature regarding the monetary economics. Supervisor:- Dr Hassan M. Mohsin