ECONOMIC OUTPUT, MONETARY POLICY TRANSMISSION AND THE ROLE OF ISLAMIC BANKS: EVIDENCE FROM PAKISTAN DUAL BANKING SYSTEM

Azam Ali (), Muhamed Zulkhibri and Tanveer Kishwar ()
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Azam Ali: Commecs Institute of Business and Emerging Sciences, Pakistan
Tanveer Kishwar: Jinnah University for Women, Pakistan

Journal of Islamic Monetary Economics and Finance, 2022, vol. 8, issue 4, 535-550

Abstract: Using co-integration analysis, this study evaluates the role of Islamic banks in monetary transmission and the economic growth of Pakistani economy. More specifically, it investigates the role of Islamic bank deposits and financing in the transmission of monetary policy impacts to the real economy. The findings suggest that Islamic bank financing and deposits play key roles in Pakistan’s monetary transmission process. The bank lending channel has the potential to become a major channel of monetary transmission in Pakistan’s economy. The bank lending channel highlights the significance of Islamic financial institutions in disseminating the effects of monetary policy across the economy. Therefore, more efforts should be made to establish a more effective Islamic money market, which might offer Islamic banks with an alternative funding source.

Keywords: Dual banking system; Bank lending; Monetary policy; Pakistan (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:idn:jimfjn:v:8:y:2022:i:4c:p:535-550

DOI: 10.21098/jimf.v8i4.1486

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