Interest Rate Pass-through in Pakistan: Evidence from Transfer Function Approach

Abdul Qayyum, Sajawal Khan () and Muhammad Khawaja

MPRA Paper from University Library of Munich, Germany

Abstract: The influence of monetary policy upon real output and the inflation rate is well established. The influence is exercised through the transmission mechanism of monetary policy. This study has examined the pass-through of Treasury Bill rate to money market rate (Call Money rate), Banks’ Deposit rate and Banks’ Lending rate. The broader conclusion is that pass-through from Treasury Bill rate to Call money rate is completed during the first month. However pass-through from Treasury Bill rate to Deposit rates and the Lending rate takes much longer, that is, these rates exhibit rigidity. The results are in conformity with the empirical evidence in the relevant literature for other countries. In practice, the pass-through to the deposit and the lending rates is expected to be quicker than evidenced in this study. The reason is that the study uses weighted average deposit and lending rate. Given that the weighted average rate takes into account outstanding deposit/loans contracted at previous rates as well, (besides the fresh deposit/loans contracted at new rates) this tends to tone down the pass-through.

Keywords: Monetary policy; Interest Pass through; transmission mechanism; pakistan (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Date: 2005, Revised 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published in The Pakistan Development Review 4.44(2005): pp. 975-1001

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/2056/1/MPRA_paper_2056.pdf original version (application/pdf)

Related works:
Journal Article: Interest Rate Pass-through in Pakistan: Evidence from Transfer Function Approach (2005)
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:pra:mprapa:2056

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().