Estimating the Index of Monetary Policy Efficiency in a Selected Country: Pakistan (in Persian)

Sedigheh Gholizadeh Kenari (), Alireza Pourfaraj () and Ahmad Jafari Samimi
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Sedigheh Gholizadeh Kenari: Central Bank of Iran
Alireza Pourfaraj: University of Mazandaran

Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), 2019, vol. 12, issue 40, 343-376

Abstract: The ultimate goal of monetary policy is to achieve price stability and favorable economic growth through policy tools. The purpose of this paper is to determine the optimal monetary policy rule and measure and evaluate the effectiveness of monetary policy in an elected economy -Pakistan- with optimal control method. In this way, using Dyn amic Programming, monetary policy makerchr('39')s loss function with respect to monetary transmission mechanism constraints will be minimized and optimal monetary policy rule is extracted. In this paper, to evaluate the index of Monetary Policy Efficiency, the total time period (1960-2017) is divided into two periods 1960-1994 and 1995-2017 and the efficiency monetary policy changes in two periods examined and compared. By assessing the efficiency of monetary policy, we can conclude that macroeconomic performance in the second period is worse than in the first period in all scenarios. Supply shocks also increased in the second period than in the first period. However, policy efficiency has increased in all scenarios. In analyzing the effectiveness of monetary policy in Pakistan, it should be noted that a more efficient monetary policy has been able to counteract some of the increase in economic shocks. In other words, the damage caused by the performance of the economy would be greater if monetary policy was not efficient and would not improve.

JEL-codes: C61 C63 E52 E53 (search for similar items in EconPapers)
Date: 2019
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