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Effectiveness of Bank Rate Instrument in Pakistan



    (Institute of Development Economics)


On January 15, 1959, bank rate was raised in Pakistan from its traditionallevel of 3 per cent to 4 per cent. This paper examines the effect of this rise of one percentage point in the bank rate on the borrowings of scheduled banks from the State Bank, their reserves, their lending rates, the supply of their credit, and the allocation of their credit among various sectors of the economy. This is done by comparing the values of certain relevant variables primarily in the year before the bank-rate change (l958) and the year after the bank-rate change (1959). From this examination of a single experience in Pakistan, it is not desired to prove that the bank rate would be effective or ineffective in future. It would, however, be unwise to ignore this bit of historical evidence in the country. The assessment will certainly give some idea of what to expect in future in comparable c~rcumstances.

Suggested Citation

  • M. Umer Chapra, 1962. "Effectiveness of Bank Rate Instrument in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 2(1), pages 84-96.
  • Handle: RePEc:pid:journl:v:2:y:1962:i:1:p:84-96

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