Implications of a Post Keynesian reframing of the Pakistani monetary system

Daniyal Khan ()
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Daniyal Khan: Department of Economics, Mushtaq Ahmad Gurmani School of Humanities and Social Sciences, Lahore University of Management Sciences, Pakistan

No 2411, Working Papers from New School for Social Research, Department of Economics

Abstract: This paper interprets Pakistan’s monetary system through the lens of a Post Keynesian endogenous money model and argues that the 2022 amendment to the State Bank of Pakistan Act, 1956 has embedded the position of the State Bank of Pakistan (SBP) as an unusually and necessarily accommodationist central bank. On the one hand, this has practical implications. The inability of the Pakistani government to borrow from the SBP has robbed it of a key money creation mechanism and flooded the banking sector with sovereign risk. On the other hand, the replacement of the private sector by the government as the dominant source of credit demand presents an interesting theoretical case in which public credit demand becomes the source of endogenous money creation.

Keywords: Money supply; central banking; financial fragility; State Bank of Pakistan; endogenous money (search for similar items in EconPapers)
JEL-codes: B52 E42 E51 E58 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2024-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-hme, nep-mon, nep-pay and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:2411

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