Evidence of Monetary Policy and Economic Growth Nexus from Pakistan

Ghulam Yahya Khan, Mehvish Azad, Salik Mehboob and Muhammad Saim Hashmi

Sustainable Business and Society in Emerging Economies, 2024, vol. 6, issue 3, 495-508

Abstract: Purpose: To analyze the relationship between monetary policy and economic growth in Pakistan, study had used time-series data from 1975 to 2023. &Design/Methodology/Approach: Employing an empirical approach, the study applies the Error Correction Model (ECM) and the Autoregressive Distributed Lag (ARDL) framework to investigate variable interactions. To capture volatility within growth-rate of GDP-per-capita (GDPPC), study further applies the “Auto Regressive Conditional Heteroscedasticity (ARCH) and Generalized Auto Regressive Conditional Heteroscedasticity (GARCH) models”.Findings: These results implied that inflation, money supply, and overall reserve-ratio exert a negative and significant impact on financial development, whereas monetary policy instruments, specifically interest rates and exchange rates, demonstrated a positive and significant effect on economic performance. Results from ARCH and GARCH analysis revealed a persistent long-run volatility effects in Pakistan’s GDPPC growth rate.Implications/Originality/Value: So, it is concluded that money supply policies can be revised and instead of increasing money supply solely, the focus can be shifted towards increasing interest-rate and exchange-rate which, in most cases, yield positive results while money supply, especially in this study, has negative sign pointing towards negative economic growth unsupportive for sustainable growth and development.

Keywords: Economic Growth; ARDL; ARCH; GARCH; Monetary Policy (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publishing.globalcsrc.org/ojs/index.php/sbsee/article/view/3160/1804 (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:src:sbseec:v:6:y:2024:i:3:p:495-508

DOI: 10.26710/sbsee.v6i3.3160

Access Statistics for this article

More articles in Sustainable Business and Society in Emerging Economies from CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan Contact information at EDIRC.
Bibliographic data for series maintained by Dr Rana Muhammad Adeel Farooq ().