Monetary Conditions Index: A Composite Measure of Monetary Policy in Pakistan
AbstractThis paper estimated Monetary Conditions Index (MCI) of inflation variable for Pakistan by using monthly data from June 1990 to June 2001. Before calculating MCI we have estimated weights of interest rate and exchange rate to be used in the construction of MCI. For this purpose we used unit root analysis and Johenson (1988) maximum likelihood method base on vector autoregressive technology. The estimated monetary conditions ratio for Pakistan is around 2.79:1. Finally we have constructed the MCI by utilising the estimated weights of rate of interest and exchange rate. The analysis indicate overall tight monetary policy during the decade. However there is some easing spell during 1997 to 1999. This shows the determinedness of monetary authorities with objective of keeping inflation low. Low inflation at the end of the decade indicates the success of monetary authorities in the conduct of monetary policy in achieving the target of low inflation.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2153.
Date of creation: 2002
Date of revision: 2002
Publication status: Published in The Pakistan Development Review 4.41(2002): pp. 551-566
Monetary Conditions Index (MCI); Monetary policy; Cointegraion; Pakistan;
Other versions of this item:
- Abdul Qayyum, 2002. "Monetary Conditions Index: A Composite Measure of Monetary Policy in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 41(4), pages 551-566.
- 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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