Measuring the effects of monetary policy in Pakistan: A factor augmented vector autoregressive approach
AbstractThis paper examines the effects of monetary policy in Pakistan economy using a data rich environment. We used the Factor Augmented Vector Autoregressive (FAVAR) methodology, which contains 115 monthly variables for the period 1992:01 to 2010:12. We compare the results of VAR and FAVAR model and the results showed that FAVAR model explains the effects of monetary policy which are consistent with theory and better than VAR model. VAR model shows the existence of price puzzle and liquidity puzzle in Pakistan while FAVAR model did not provide any evidence of puzzles. FAVAR model supports the effectiveness of interest rate channel in Pakistan.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 35976.
Date of creation: 16 Jan 2012
Date of revision:
Monetary Policy; VAR; FAVAR;
Other versions of this item:
- Kashif Munir & Abdul Qayyum, 2014. "Measuring the effects of monetary policy in Pakistan: a factor-augmented vector autoregressive approach," Empirical Economics, Springer, vol. 46(3), pages 843-864, May.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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