The price puzzle and monetary policy transmission mechanism in Pakistan: Structural vector autoregressive approach
AbstractThis paper address the issue of monetary policy effectiveness and the price puzzle, a positive response of prices to monetary tightening, in Pakistan. Study examines the effects of monetary policy shock on price level and other macroeconomic variables such as output, exchange rate and money supply within the structural VAR framework over the period 1992: M1 to 2010:M08. We find that a contractionary monetary policy shock has a positive effect on prices and the output increase over some horizon following the monetary tightening but continuously falls after initial rise. The results also indicate that monetary contractions in Pakistan over period reviewed associated with persistent depreciation of domestic currency value relative to the U.S. dollar.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 30670.
Date of creation: 2011
Date of revision:
Monetary policy; Price puzzle; Structural VAR; Pakistan;
Other versions of this item:
- Muhammad Javid & Kashif Munir, 2010. "The Price Puzzle and Monetary Policy Transmission Mechanism in Pakistan: Structural Vector Autoregressive Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 49(4), pages 449â€“460.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-14 (All new papers)
- NEP-MAC-2011-05-14 (Macroeconomics)
- NEP-MON-2011-05-14 (Monetary Economics)
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