Influence on Banks' Credit Risk Through Monetary Policy Instruments: A Study of Listed Commercial Banks in Pakistan

Rimsha Shahid, Rimsha Shahid, Hammad Badar, Aqsa Iftikhar, Sidra Ghulam Muhammad, Dr. Muhammad Navid Iqbal, Zulfiqar Hussain Awan and Faisal Nadeem Shah
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Rimsha Shahid: Visiting Lecturer, Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan
Rimsha Shahid: Visiting Lecturer, Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan
Hammad Badar: Associate Professor, Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan
Aqsa Iftikhar: Visiting Lecturer, Department of Business Administration, Thal University Bhakkar, Pakistan
Sidra Ghulam Muhammad: Visiting Lecturer, Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan
Dr. Muhammad Navid Iqbal: Lecturer, Department of Business Administration, Faisalabad Business School, National Textile University, Faisalabad, Pakistan
Zulfiqar Hussain Awan: Lecturer Department of Economics, University of Sargodha, Pakistan
Faisal Nadeem Shah: Lecturer Department of Economics, University of Sargodha, Pakistan

Bulletin of Business and Economics (BBE), 2024, vol. 13, issue 2, 255-265

Abstract: Monetary policy goals in any country are to accomplish economic and social goals to achieve financial prosperity. The study determined the impact of monetary policy tools on bank’s Credit Risk, which was previously unexplored. The analytical and econometrical design was adopted in this study. Descriptive statistics, correlation matrix, CD test, and DK regression were employed to determine the impact of monetary policy instruments on the bank’s Credit Risk. Multivariate statistical techniques were used to evaluate balanced panel data from 22 banks currently operating in Pakistan cover the span of 2009-2021. Banks were declared cross-sectionally dependent. ROE was positively associated with MG, ROA was negatively linked with INF in the Correlation Matrix. The overall research explored that PR and MG had a positive impact on ROE and ROA, but SLR showed an inverse impact on Credit Risk. This research used a large number of banks as a novel component in Pakistan’s context and filled a gap in the country’s banking literature. The paper will assist the government, managers of the banking industry, monetarists, stakeholders, investors, academicians, and researchers. This study could be extremely helpful to regulators in formulating favorable policy rates that fulfill Pakistan’s economic targets.

Keywords: credit risk; monetary policy; commercial banks (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:rfh:bbejor:v:13:y:2024:i:2:p:255-265

DOI: 10.61506/01.00324

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