Abstract
This paper investigates the influence of Monetary Policy (MP) on the credit supply
decisions of Islamic Banks (IBs) and Conventional Banks (CBs) of Pakistan. The
empirical analysis covers the period 2005-2017. The robust two-step system-GMM
results provide strong evidence that MP measures are significantly and negatively
related to the credit supply in the economy, confirming the existence of the “bank credit
channel” of MP in the economy. Yet, the results show that the impacts of MP on
financing decisions are weak for IBs than for CBs. Our results suggest that for effective
implementation of the MP, the monetary authorities should take into account the
relatively slow response of IBs to MP actions.
Abdul Rashid, Muhammad Abdul Rehman Shah, Muhammad Tahir Mansoori. (2019) An Empirical Investigation of the Credit Channel of Monetary Policy: Islamic versus Conventional Banks of Pakistan, NUML International Journal of Business & Management, Volume 14, Issue 2.
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