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Monetary Policy Effectiveness in Pakistan:An In-depth Analysis of Four Transmission Channels

Author

Listed:
  • Fida Hussain

    (State Bank of Pakistan)

  • Fayyaz Hussain

    (State Bank of Pakistan)

  • Kalim Hyder

    (State Bank of Pakistan)

Abstract

This paper assesses the evolution and relative strength of different channels of monetary policy transmission mechanism, including interest rate, credit, assets price and exchange rate channels. We have used Structural Vector Autoregressive (SVAR) method on monthly data from 1991 to 2019 for this purpose. The results show that monetary policy effectiveness has improved over time. And the credit channel is a relatively more effective in transmitting the changes in monetary policy stance to the economy as compared to other channels.

Suggested Citation

  • Fida Hussain & Fayyaz Hussain & Kalim Hyder, 2022. "Monetary Policy Effectiveness in Pakistan:An In-depth Analysis of Four Transmission Channels," SBP Working Paper Series 109, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:109
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Pakistan; monetary policy transmission channels; interest rate; exchange rate; credit; assets prices; SVAR; VECM; inflation.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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