The Impact of Monetary Policy on Lending and Deposit Rates in Pakistan: Panel Data Analysis

Hasan Mohsin

Lahore Journal of Economics, 2011, vol. 16, issue Special Edition, 199-213

Abstract: This study estimates the impact of monetary policy on lending and deposit rates in Pakistan, using bank data for the period November 2001 to March 2011. We find evidence of a long-run relationship between the lending and discount rate, but the deposit rate is not co-integrated, and the pass-through is not complete. The study finds that, overall, banks pass on only 20 percent of the impact of a change in the discount rate to lenders in the first month. There is also a significant difference among various banks’ pass-through rates. A shortrun analysis reveals that the pass-through of the deposit rate is low at 0.16, which implies that the effectiveness of monetary policy is limited in Pakistan.

Keywords: Monetary Policy; Lending; Deposit Rates; Pakistan. (search for similar items in EconPapers)
JEL-codes: E43 E52 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (6)

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Working Paper: 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:lje:journl:v:16:y:2011:i:sp:p:199-213

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