Impact of monetary policy on lending and deposit rates in Pakistan: Panel data analysis

Hasan Mohsin

MPRA Paper from University Library of Munich, Germany

Abstract: The study estimates impact of monetary policy (discount rate) on lending and deposit rates in Pakistan using bank type data from November 2001 to March 2011. The study finds evidence of long run relationship between lending and discount rate but deposit rate is not cointegrated with discount rate, monetary policy instrument. The study also finds an increase in the lending rate pass through rate during restricted monetary policy times (2005-2010), whereas deposit rate pass through remains same. The study finds that overall banks pass on only 20% impact of a change in discount rate to the lenders in first month implying it is not complete. There is also significant difference in various bank types pass through rates. The pass through of deposit rate is further low at 0.16 as revealed by short run analysis. It implies that the effectiveness of monetary policy is limited in Pakistan.

Keywords: Discount rate; pass-through; monetary policy (search for similar items in EconPapers)
JEL-codes: E00 E58 (search for similar items in EconPapers)
Date: 2011-01, Revised 2011-08
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: The Impact of Monetary Policy on Lending and Deposit Rates in Pakistan: Panel Data Analysis (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:33301

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