Transmission Mechanism of Monetary Policy in Pakistan

Asif Idrees Agha, Noor Ahmed (), Yasir Ali Mubarik and Hastam Shah ()
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Asif Idrees Agha: State Bank of Pakistan
Noor Ahmed: State Bank of Pakistan
Yasir Ali Mubarik: State Bank of Pakistan
Hastam Shah: State Bank of Pakistan

SBP Research Bulletin, 2005, vol. 1, 1-23

Abstract: This paper uses vector autoregressions to examine the monetary transmission mechanism in Pakistan. The results indicate that monetary tightening leads first to a fall in domestic demand, primarily investment demand financed by bank lending, which translates into a gradual reduction in price pressures that eventually reduces the overall price level with a significant lag. In addition to the traditional interest rate channel, the results point to a transmission mechanism in which banks play an important role. We have also found an active asset price channel. The exchange rate channel has been less significant by comparison.

Keywords: Monetary Policy; Transmission; Mechanism (search for similar items in EconPapers)
JEL-codes: E50 E52 E58 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59)

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http://www.sbp.org.pk/repec/sbp/journl/Article-1.pdf First version, 2005 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:sbp:journl:01

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