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Monetary policy and exchange market pressure in Pakistan

Author

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  • Shabbir Ahmed

    (University of Nizwa, Oman)

Abstract

This study analyses the foreign exchange market disequilibrium in Pakistan. A monetary model of exchange market pressure has been developed and estimated using a VAR model. Employing Granger causality and impulse response analysis, it is shown that monetary authorities in Pakistan have only limited control over the domestic money supply and any effort to increase domestic credit will not be successful as it leads to the drainage of foreign reserves and attempts to sterilise the monetary effects of the loss of reserves will be largely ineffective.

Suggested Citation

  • Shabbir Ahmed, 2013. "Monetary policy and exchange market pressure in Pakistan," Journal of Developing Areas, Tennessee State University, College of Business, vol. 47(1), pages 339-353, January-J.
    • Handle: RePEc:jda:journl:vol.47:year:2013:issue1:pp:339-353
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    File URL: http://muse.jhu.edu/journals/journal_of_developing_areas/v047/47.1.ahmed.html
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    Citations

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    Cited by:

    1. Ratnasari, Anggraeni & Widodo, Tri, 2017. "Exchange Market Pressure and Monetary Policies in ASEAN5," MPRA Paper 81543, University Library of Munich, Germany.
    2. Siklar Ilyas & Akca Aysegul, 2020. "Exchange Market Pressure and Monetary Policy: The Turkish Case," Ekonomika (Economics), Sciendo, vol. 99(1), pages 110-130, June.

    More about this item

    Keywords

    Exchange Market Pressure; Pakistan; Monetary Policy; Vector Autoregressive; Granger Causality; Impulse Response Function;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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