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Influence on Banks' Credit Risk Through Monetary Policy Instruments: A Study of Listed Commercial Banks in Pakistan

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  • Rimsha Shahid

    (Visiting Lecturer, Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan)

  • Rimsha Shahid

    (Visiting Lecturer, Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan)

  • Hammad Badar

    (Associate Professor, Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan)

  • Aqsa Iftikhar

    (Visiting Lecturer, Department of Business Administration, Thal University Bhakkar, Pakistan)

  • Sidra Ghulam Muhammad

    (Visiting Lecturer, Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan)

  • Dr. Muhammad Navid Iqbal

    (Lecturer, Department of Business Administration, Faisalabad Business School, National Textile University, Faisalabad, Pakistan)

  • Zulfiqar Hussain Awan

    (Lecturer Department of Economics, University of Sargodha, Pakistan)

  • Faisal Nadeem Shah

    (Lecturer Department of Economics, University of Sargodha, Pakistan)

Abstract

Monetary policy goals in any country are to accomplish economic and social goals to achieve financial prosperity. The study determined the impact of monetary policy tools on bank’s Credit Risk, which was previously unexplored. The analytical and econometrical design was adopted in this study. Descriptive statistics, correlation matrix, CD test, and DK regression were employed to determine the impact of monetary policy instruments on the bank’s Credit Risk. Multivariate statistical techniques were used to evaluate balanced panel data from 22 banks currently operating in Pakistan cover the span of 2009-2021. Banks were declared cross-sectionally dependent. ROE was positively associated with MG, ROA was negatively linked with INF in the Correlation Matrix. The overall research explored that PR and MG had a positive impact on ROE and ROA, but SLR showed an inverse impact on Credit Risk. This research used a large number of banks as a novel component in Pakistan’s context and filled a gap in the country’s banking literature. The paper will assist the government, managers of the banking industry, monetarists, stakeholders, investors, academicians, and researchers. This study could be extremely helpful to regulators in formulating favorable policy rates that fulfill Pakistan’s economic targets.

Suggested Citation

  • Rimsha Shahid & Rimsha Shahid & Hammad Badar & Aqsa Iftikhar & Sidra Ghulam Muhammad & Dr. Muhammad Navid Iqbal & Zulfiqar Hussain Awan & Faisal Nadeem Shah, 2024. "Influence on Banks' Credit Risk Through Monetary Policy Instruments: A Study of Listed Commercial Banks in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(2), pages 255-265.
    • Handle: RePEc:rfh:bbejor:v:13:y:2024:i:2:p:255-265
    DOI: https://doi.org/10.61506/01.00324
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    References listed on IDEAS

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