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An Introduction to Monetary Policy Framework ofPakistan: Instruments, Objectives, and Mechanism

Author

Listed:
  • Muhammad Abdul Rehman Shah

    (University of Engineering & Technology, (UET) Taxila, Pakistan)

  • Kashif Raza

    (The Islamia University of Bahawalpur, Pakistan)

  • Manzoor Ahmad Alazhari

    (HITEC University Taxila, Pakistan)

Abstract

In an economy, a central bank's behavior in formulating monetary policy is characterized by some specific actions. These actions meet the complex process of decisions about how a central bank regulates its policy instruments responding to the macroeconomicenvironment. In the case of Pakistan, the State Bank of Pakistan (SBP) has the mandate to regulate the monetary and credit system through a variety of monetary policy instruments and implementation mechanisms. Despite empirical studies on the subject, themonetary policy mechanism of SBP is comparatively less explored by connecting the policy stances to financial markets. We present a comprehensive review of the framework of monetary policy with modern monetary policy instruments. This study is equally important for researchers, investors, and bankers an insight into procedures of monetary policy of SBP. Similarly, it also helps stakeholders of the corporate sector and SMEs to allocate their resources efficiently after knowing the policy mechanism of the central bank.

Suggested Citation

  • Muhammad Abdul Rehman Shah & Kashif Raza & Manzoor Ahmad Alazhari, 2018. "An Introduction to Monetary Policy Framework ofPakistan: Instruments, Objectives, and Mechanism," Pakistan Journal of Economic Studies, Department of Economics, The Islamia University of Bahawalpur, Pakistan., vol. 1(2), pages 111-129, December.
    • Handle: RePEc:akw:iupjes:v:1:y:2018:i:2:p:111-129
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    File URL: https://journals.iub.edu.pk/index.php/pjes/article/view/323/7
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    File URL: https://journals.iub.edu.pk/index.php/pjes/article/view/323
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    Citations

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    Cited by:

    1. Kabir, Anis & Abdul Rehman Shah, Syed Muhammad & Hassan, M. Kabir & Akmal, Muhammad, 2022. "The Transmission Mechanism of Monetary Policy via Bank’ Balance Sheet: An Empirical Study of Dual Banking System in Pakistan," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(2), pages 129-140.

    More about this item

    Keywords

    Monetary Policy; Monetary Instruments; SBP; Central Banking; Pakistan Economy; Policy Rates.;
    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

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