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Capital Flows and Money Supply: The Degree of Sterilisation in Pakistan

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  • Qayyum, Abdul
  • Khan, Arshad

Abstract

In this study an attempt has been made to develop and estimate the domestic credit policy reaction function to analyse the monetary implications of interventions and sterilisation policy in Pakistan using quarterly data ranging from 1982 Q3 through 2001 Q2. By employing Johansen multivariate cointegration technique, this paper has considered the degree of sterilisation that the Pakistan has used in controlling capital flows. The evidence suggests that Pakistan sterilises around 72 percent of international reserve inflows in the long-run while 88 percent in the short-run during the period of study.

Suggested Citation

  • Qayyum, Abdul & Khan, Arshad, 2003. "Capital Flows and Money Supply: The Degree of Sterilisation in Pakistan," MPRA Paper 2150, University Library of Munich, Germany, revised 2003.
    • Handle: RePEc:pra:mprapa:2150
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    6. Pasula, Kit, 1994. "Sterilization, ricardian equivalence and structural and reduced-form estimates of the offset coefficient," Journal of Macroeconomics, Elsevier, vol. 16(4), pages 683-699.
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    8. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Paper 1227, Economics Department, Queen's University.
    9. Bahmani-Oskooee, Mohsen & Techaratanachai, Ampa, 2001. "Currency substitution in Thailand," Journal of Policy Modeling, Elsevier, vol. 23(2), pages 141-145, February.
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    Cited by:

    1. Aissa DJEDAIET & Hicham AYAD, 2017. "Hard currency inflows and sterilization policy in Algeria: An ARDL approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(612), A), pages 83-96, Autumn.
    2. Naved Ahmad & Fareed Ahmed, 2006. "The Long-run and Short-run Endogeneity of Money Supply in Pakistan: An Empirical Investigation," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 267-278..
    3. Waheed, Muhammad, 2010. "Foreign exchange intervention and sterilization: an investigation of State Bank of Pakistan’s Reaction Function," MPRA Paper 33161, University Library of Munich, Germany.
    4. Nadeem Ul Haque & Musleh-ud Din & Lubna Hasan, 2007. "Research at PIDE: Key Messages," PIDE Books, Pakistan Institute of Development Economics, number 2007:2, December.
    5. Igor Ljubaj & Ana Martinis & Marko Mrkalj, 2010. "Capital Inflows and Efficiency of Sterilisation – Estimation of Sterilisation and Offset Coefficients," Working Papers 24, The Croatian National Bank, Croatia.

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    More about this item

    Keywords

    Money Supply; sterlization; capital inflow; dometic credit; unit root; cointegration;
    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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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