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Impact of Interbank Liquidity on Monetary Transmission Mechanism: A Case Study of Pakistan

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  • Muhammed Omar
  • Jakob de Hann
  • Bert Scholtens

Abstract

The transmission mechanism of policy-induced changes are is analysed in the discount rate and required reserves in Pakistan. The results suggest that the pass through to the lending rate is complete for the discount rate but incomplete for required reserves. However, only shocks to required reserves have an effect on the deposit rate and the exchange rate in the long run. The observation that the discount rate is not a very effective monetary policy tool is attributed to excess liquidity present in the interbank market of Pakistan.

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  • Muhammed Omar & Jakob de Hann & Bert Scholtens, 2015. "Impact of Interbank Liquidity on Monetary Transmission Mechanism: A Case Study of Pakistan," Working Papers id:6915, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:6915
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    More about this item

    Keywords

    Pakistan; policy; discount rate; reserves; monetary policy; liquidity; interbank market;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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