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Procyclical Monetary Policy and Governance

Author

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  • Choudhary, M. Ali
  • Hanif, M. Nadim
  • Khan, Sajawal
  • Rehman, Muhammad

Abstract

Weak governance adversely affects firm’s net worth and consequently the value of its collateral. This negative impact on the collateral reduces the external credit available for importing inputs constraining potential output. As a result, a stronger procyclical monetary policy stance is adopted for protecting the exchange rate and hence arresting the degradation in the collateral constraint.

Suggested Citation

  • Choudhary, M. Ali & Hanif, M. Nadim & Khan, Sajawal & Rehman, Muhammad, 2010. "Procyclical Monetary Policy and Governance," MPRA Paper 27022, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:27022
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    References listed on IDEAS

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    5. Huang, Haizhou & Wei, Shang-Jin, 2006. "Monetary policies for developing countries: The role of institutional quality," Journal of International Economics, Elsevier, vol. 70(1), pages 239-252, September.
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    Citations

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    Cited by:

    1. Shahzad Ahmad & Farooq Pasha, 2015. "A Pragmatic Model for Monetary Policy Analysis I: The Case of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 11, pages 1-42.
    2. Mehak Moazam & M. Ali Kemal, 2016. "Inflation in Pakistan: Money or Oil Prices," Working Papers id:11507, eSocialSciences.
    3. Muhammad Nadim Hanif & Muhammad Jahanzeb Malik, 2015. "Evaluating the Performance of Inflation Forecasting Models of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 11, pages 43-78.
    4. Adnan Haider & Musleh ud Din & Ejaz Ghani, 2011. "Consequences of Political Instability, Governance and Bureaucratic Corruption on Inflation and Growth: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 773-807.
    5. Rozina Shaheen, 2020. "Credit market conditions and impact of monetary policy in a developing economy context," International Economics and Economic Policy, Springer, vol. 17(2), pages 409-425, May.
    6. Shahzada M. Naeem Nawaz & Ather Maqsood Ahmed, 2015. "New Keynesian Macroeconomic Model and Monetary Policy in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(1), pages 55-71.
    7. Ahmed, Waqas & Khan, Sajawal & Rehman, Muhammad, 2013. "Optimal Monetary Policy in the Presence of an Informal Sector and Firm-Level Credit Constraints," MPRA Paper 53169, University Library of Munich, Germany.
    8. Aadil Nakhoda, 2014. "The Influence of Industry Financial Composition on the Exports from Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 10, pages 21-49.

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    More about this item

    Keywords

    Collateral Constraints; Governance; Monetary Policy;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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