Interest Rate Pass-Through: Empirical Evidence from Pakistan

Sheikh Khurram Fazal () and Muhammad Abdus Salam
Additional contact information
Sheikh Khurram Fazal: Mitsubishi Corporation, Karachi, Pakistan.

Lahore Journal of Economics, 2013, vol. 18, issue 1, 39-62

Abstract: This article empirically examines the interest rate pass through mechanism for Pakistan, using six month treasury bills as a proxy for the policy rate (the exogenous variable) and the weighted average lending rate and weighted average deposit rate as endogenous variables representing the lending and deposit channels, respectively. We use data for a six year period from June 2005 to May 2011, published by the central monetary authority in Pakistan. The widely accepted error correction mechanism is used to examine the shortrun and long run pass-through; a vector error correction mechanism impulse response function helps measure the short run speed of the pass-through. We find that there is an incomplete pass-through in Pakistan for both the lending and deposit channels. The impact is greater on the lending channel than on the deposit channel in both the short and long run, while the adjustment speed is higher for the lending channel.

Keywords: Interest rate pass-through; interest rate channel; transmission mechanism; monetary policy; Pakistan. (search for similar items in EconPapers)
JEL-codes: E43 E58 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://121.52.153.179/JOURNAL/LJE%20Vol%2018-1/02%20Fazal%20and%20Salam%20.pdf (application/pdf)

Related works:
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:18:y:2013:i:1:p:39-62

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 ().