EconPapers    
Economics at your fingertips  
 

Exchange Market Pressure and Monetary Policy: Evidence from Pakistan

Muhammad Khawaja

Lahore Journal of Economics, 2007, vol. 12, issue 2, 83-114

Abstract: The study employs the Girton and Roper (1977) measure of exchange market pressure (defined as the sum of exchange rate depreciation and foreign reserves outflow), to examinethe interaction between exchange market pressure and monetary variables, viz. domestic credit (Reserve Money) and the interest rate. Evidence from impulse response functions suggests that domestic credit has remained the dominant tool of monetary policy for managing exchange market pressure. The increase in domestic credit upon increases in exchange market pressure (during 1991-98) was imprudent. The results suggest that fiscal needs/growth objectives might have dominated external account considerations during this period. Post 9/11 there is evidence of sterilized intervention in the forex market. The interest rate has also weakly served as the tool of monetary policy during the hay days of foreign currency deposits (1991-98). The finding implies that, for the interest rate to work as tool of monetary policy vis-a-vis exchange market pressure, a reasonable degree of capital mobility is called for.

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://121.52.153.179/JOURNAL/Vol.12,%20No.2/Idrees.pdf (application/pdf)

Related works:
Working Paper: Exchange Market Pressure and Monetary Policy: Evidence from Pakistan (2007) Downloads
Working Paper: Exchange Market Pressure and Monetary Policy: Evidence from Pakistan (1970) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lje:journl:v:12:y:2007:i:2:p:83-114

Access Statistics for this article

More articles in Lahore Journal of Economics from Department of Economics, The Lahore School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Shahid Salahuddin ().

 
Page updated 2025-03-19
Handle: RePEc:lje:journl:v:12:y:2007:i:2:p:83-114