Interest Rate Pass-Through: Empirical Evidence from Pakistan
This article empirically examines the interest rate pass through mechanism for Pakistan, using six month treasury bills as a proxy for the policy rate (the exogenous variable) and the weighted average lending rate and weighted average deposit rate as endogenous variables representing the lending and deposit channels, respectively. We use data for a six year period from June 2005 to May 2011, published by the central monetary authority in Pakistan. The widely accepted error correction mechanism is used to examine the shortrun and long run pass-through; a vector error correction mechanism impulse response function helps measure the short run speed of the pass-through. We find that there is an incomplete pass-through in Pakistan for both the lending and deposit channels. The impact is greater on the lending channel than on the deposit channel in both the short and long run, while the adjustment speed is higher for the lending channel.
Volume (Year): 18 (2013)
Issue (Month): 1 (Jan-June)
|Contact details of provider:|| Postal: Intersection Main Boulevard Phase VI DHA and Burki Road, Lahore|
Phone: (92-42) 6560939
Web page: http://www.lahoreschoolofeconomics.edu.pk/EconomicsJournal/LJEIntro.aspx
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:pid:journl:v:49:y:2010:i:4:p:449-460 is not listed on IDEAS
- Qayyum, Abdul & Khan, Sajawal & Khawaja, Idrees, 2005.
"Interest Rate Pass-through in Pakistan: Evidence from Transfer Function Approach,"
2056, University Library of Munich, Germany, revised 2005.
- Marco A. Espinosa-Vega & Alessandro Rebucci, 2004.
"Retail Bank Interest Rate Pass-through: Is Chile Atypical?,"
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 5, pages 147-182
Central Bank of Chile.
- Alessandro Rebucci & Marco A Espinosa-Vega, 2003. "Retail Bank Interest Rate Pass-Through; Is Chile Atypical?," IMF Working Papers 03/112, International Monetary Fund.
- Marco A. Espinosa-Vega & Alessandro Rebucci, 2003. "Retail Bank Interest Rate Pass-Through: Is Chile Atypical?," Working Papers Central Bank of Chile 221, Central Bank of Chile.
- Ben S. Bernanke & Alan S. Blinder, 1989.
"The federal funds rate and the channels of monetary transmission,"
89-10, Federal Reserve Bank of Philadelphia.
- Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-21, September.
- Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
- Akyurek, Cem & Kutan, Ali M. & Yilmazkuday, Hakan, 2011. "Can inflation targeting regimes be effective in developing countries? The Turkish experience," Journal of Asian Economics, Elsevier, vol. 22(5), pages 343-355, October.
- repec:pid:journl:v:46:y:2007:i:2:p:129-143 is not listed on IDEAS
- Tushar Poddar & Hasmik Khachatryan & Randa Sab, 2006. "The Monetary Transmission Mechanism in Jordan," IMF Working Papers 06/48, International Monetary Fund.
- Halil Ibrahim Aydin, 2007. "Interest Rate Pass-Through in Turkey," Working Papers 0705, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- Alexander F. Tieman, 2004. "Interest Rate Pass-Through in Romania and Other Central European Economies," IMF Working Papers 04/211, International Monetary Fund.
- Steven Cook, 2008. "Econometric analysis of interest rate pass-through," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 4(4), pages 249-251.
- Bredin, Don & Fitzpatrick, Trevor & O'Reilly, Gerard, 2001.
"Retail Interest Rate Pass-Through: The Irish Experience,"
Research Technical Papers
6/RT/01, Central Bank of Ireland.
- Don Bredin & Trevor Fitzpatrick & Gerard O Reilly, 2002. "Retail Interest Rate Pass-Through - The Irish Experience," The Economic and Social Review, Economic and Social Studies, vol. 33(2), pages 223-246.
- Al-Mashat Rania & Billmeier Andreas, 2008.
"The Monetary Transmission Mechanism in Egypt,"
Review of Middle East Economics and Finance,
De Gruyter, vol. 4(3), pages 32-82, September.
- Rania A. Al-Mashat & Andreas Billmeier, 2007. "The Monetary Transmission Mechanism in Egypt," IMF Working Papers 07/285, International Monetary Fund.
- Rania Al Mashat & Andreas Billmeier, 2008. "The Monetary Transmission Mechanism in Egypt," Working Papers 411, Economic Research Forum, revised Jun 2008.
- Rodolfo Maino & BalÃ¡zs HorvÃ¡th, 2006. "Monetary Transmission Mechanisms in Belarus," IMF Working Papers 06/246, International Monetary Fund.
- Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc.
- Muhammad Farooq Arby & Muhammad Nadeem Hanif, 2010.
"Monetary and Fiscal Policies Coordination: Pakistan’s Experience,"
SBP Research Bulletin,
State Bank of Pakistan, Research Department, vol. 6, pages 3-13.
- Arby, Muhammad Farooq & Hanif, Muhammad Nadeem, 2010. "Monetary and fiscal policies coordination - Pakistan's experience," MPRA Paper 24160, University Library of Munich, Germany.
- Era Dabla-Norris & Holger Floerkemeier, 2006. "Transmission Mechanisms of Monetary Policy in Armenia; Evidence from VAR Analysis," IMF Working Papers 06/248, International Monetary Fund.
- Idrees Khawaja & Musleh-ud Din, 2007.
"Determinants of Interest Spread in Pakistan,"
Macroeconomics Working Papers
22209, East Asian Bureau of Economic Research.
- Javid, Muhammad & Munir, Kashif, 2011.
"The price puzzle and monetary policy transmission mechanism in Pakistan: Structural vector autoregressive approach,"
30670, University Library of Munich, Germany.
When requesting a correction, please mention this item's handle: RePEc:lje:journl:v:18:y:2013:i:1:p:39-62. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shahid Salahuddin)
If references are entirely missing, you can add them using this form.