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Output Composition of Monetary Policy Transmission in Pakistan

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  • Kamal, Asmma

Abstract

This paper employs an unrestricted vector autoregressive (VAR) model, identified using a recursive Cholesky decomposition, to examine the output composition of the monetary policy transmission mechanism in Pakistan. The results indicate that a contractionary monetary policy shock leads to a relatively larger decline in private consumption compared to private investment with a significant lag. Furthermore, preliminary analysis suggests that the consumption channel plays a more important role than investment channel in contributing to the output reactions resulting from policy rate (interbank rate) shocks during the period 1995Q3 2010Q2 analysed in this study.

Suggested Citation

  • Kamal, Asmma, 2016. "Output Composition of Monetary Policy Transmission in Pakistan," MPRA Paper 78655, University Library of Munich, Germany, revised 20 Apr 2017.
    • Handle: RePEc:pra:mprapa:78655
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    References listed on IDEAS

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    3. Asif Idrees Agha & Noor Ahmed & Yasir Ali Mubarik & Hastam Shah, 2005. "Transmission Mechanism of Monetary Policy in Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 1, pages 1-23.
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    12. Ignazio Angeloni & Anil K Kashyap & Benoît Mojon & Daniele Terlizzese, 2004. "The Output Composition Puzzle: A Difference in the Monetary Transmission Mechanism in the Euro Area and the United States," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 3, pages 059-120, Central Bank of Chile.
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    Cited by:

    1. Chuluunbayar, Delgerjargal, 2019. "Output Composition of Monetary Policy Transmission in Mongolia," MPRA Paper 98111, University Library of Munich, Germany.

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    More about this item

    Keywords

    Monetary policy; output composition; consumption; investment;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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