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Monetary Targeting in Pakistan: A Skeptical Note

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  • Saqib, Omar F
  • Omer, Muhamad

Abstract

The objective of this study is to evaluate monetary targeting strategy in Pakistan by testing the Quantity Theory of Money and the income velocity of money stated by Monetarists and the endogenous money hypothesis postulated by the Post Keynesians. Our tests on the Pakistani data covering about thirty years reveal that the quantity theory is an inadequate explanation of inflation, income velocity of money is unstable, and money is endogenous. These results suggest rethinking on monetary targeting strategy in Pakistan.

Suggested Citation

  • Saqib, Omar F & Omer, Muhamad, 2008. "Monetary Targeting in Pakistan: A Skeptical Note," MPRA Paper 14883, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:14883
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    Cited by:

    1. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    2. Adnan Haider & Asad Jan & Kalim Hyder, 2013. "On the (Ir)Relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 18(2), pages 65-119, July-Dec.
    3. Khan, Safdar Ullah & Saqib, Omar Farooq, 2011. "Political instability and inflation in Pakistan," Journal of Asian Economics, Elsevier, vol. 22(6), pages 540-549.
    4. Omer, Muhammad, 2009. "Stability of money demand function in Pakistan," MPRA Paper 35306, University Library of Munich, Germany.
    5. repec:spr:jecfin:v:41:y:2017:i:2:d:10.1007_s12197-015-9350-6 is not listed on IDEAS
    6. Muhammad, Omer & de Haan, Jakob & Scholtens, Bert, 2014. "Impact of Interbank Liquidity on Monetary Transmission Mechanism: A Case Study of Pakistan," MPRA Paper 56161, University Library of Munich, Germany.
    7. Muhammad Omer & Jakob De Haan & Bert Scholtens, 2015. "An empirical analysis of excess interbank liquidity: a case study of Pakistan," Applied Economics, Taylor & Francis Journals, vol. 47(44), pages 4754-4776, March.
    8. Hassan, Rubina & Shahzad, Mirza Muhammad, 2011. "A macroeconometric framework for monetary policy evaluation: A case study of Pakistan," Economic Modelling, Elsevier, vol. 28(1-2), pages 118-137, January.
    9. Mohsin S. Khan, 2009. "The Design and Conduct of Monetary Policy: Lessons for Pakistan (The Quaid-i-Azam Lecture)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 48(4), pages 337-356.
    10. Muhammad Javid & Kashif Munir, 2010. "The Price Puzzle and Monetary Policy Transmission Mechanism in Pakistan: Structural Vector Autoregressive Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 449-460.

    More about this item

    Keywords

    Monetary Targeting; QTM; Income Velocity of Money; Endogenous Money;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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