On The (Ir)relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View

Asad Jan (), Adnan Haider () and Syed Bukhari
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Asad Jan: State Bank of Pakistan
Adnan Haider: Institute of Business Administration (IBA), Karachi

No 62, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: This study investigates and searches for a stable money demand function for Pakistan’s economy, where monetary aggregate is considered as the nominal anchor. The stability of the money demand has been the focus of numerous debates due to evolving financial innovations and regulations. Earlier studies in Pakistan on the subject provide conflicting explanations due to inadequate specification and imprecise estimation of money demand. However, this study finds that money demand in Pakistan is stable, if specified properly. Therefore, for developing countries, like Pakistan, targeting of monetary aggregates or responding to deviations from the desirable path is important for effective implementation and communication of monetary policy stance and it should remain, if not primary, an auxiliary target in the monetary policy framework.

Keywords: Money demand; stability; monetarism (search for similar items in EconPapers)
JEL-codes: C20 E12 E41 E5 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2013-07
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: On the (Ir)Relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View (2013)
Working Paper: On the (IR) Relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View (2012)
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