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On The (Ir)relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View

Author

Listed:
  • Asad Jan

    () (State Bank of Pakistan)

  • Adnan Haider

    () (Institute of Business Administration (IBA), Karachi)

  • Syed Kalim Hyder Bukhari

    () (State Bank of Pakistan)

Abstract

This study investigates and searches for a stable money demand function for Pakistan’s economy, where monetary aggregate is considered as the nominal anchor. The stability of the money demand has been the focus of numerous debates due to evolving financial innovations and regulations. Earlier studies in Pakistan on the subject provide conflicting explanations due to inadequate specification and imprecise estimation of money demand. However, this study finds that money demand in Pakistan is stable, if specified properly. Therefore, for developing countries, like Pakistan, targeting of monetary aggregates or responding to deviations from the desirable path is important for effective implementation and communication of monetary policy stance and it should remain, if not primary, an auxiliary target in the monetary policy framework.

Suggested Citation

  • Asad Jan & Adnan Haider & Syed Kalim Hyder Bukhari, 2013. "On The (Ir)relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View," SBP Working Paper Series 62, State Bank of Pakistan, Research Department.
  • Handle: RePEc:sbp:wpaper:62
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    Cited by:

    1. Adnan Haider & Musleh ud Din & Ejaz Ghani, 2012. "Monetary Policy, Informality and Business Cycle Fluctuations in a Developing Economy Vulnerable to External Shocks," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 609-681.

    More about this item

    Keywords

    Money demand; stability; monetarism;

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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