Monetary Policy Effectiveness in Pakistan: A Reassessment of Four Transmission Channels
DOI:
https://doi.org/10.61506/01.00563Keywords:
Asset price channel, Direct interest rate channel, Exchange rate channel, Bank lending ChannelAbstract
Monetary policy is an important financial tool to maintain the total demand in an economy. The main objective of this study is to understand the feasibility of monetary transmission mechanism channels and to investigate the fundamental monetary transmission mechanism channel for Pakistan. To evaluate the asset price, direct interest rate, exchange rate, and bank lending channels, the study used the time series data spanning from 1972 to 2023 and for the estimation of data employed the vector-autoregressive, impulse response function, and variance decomposition model. The results of the study indicate that the exchange rate channel is the more significant channel in Pakistan’s economy.
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