Abstract
Study in hand inspects the monetary policy transmission mechanisms in Pakistan
with a special focus on bank lending and asset price channels. Monthly data over the period
2000M7-2016M12 are being used for the short run analysis of monetary policy. The lending
and asset price transmission channels remain largely unexplored since financial reforms and
pursuance of market-based monetary policy instruments. The empirical exploration is based
on SVAR framework. The results show that the monetary aggregates targeting agenda is still
operative in effecting the output and price level. Bank lending have a non-trivial part through
the investment channel and share prices through wealth effect on price level and output, while
the conventional interest rate channel seemed to be ineffective in the transmission mechanism
process in Pakistan. The findings of generalized impulse response functions are backed by the
generalized error forecast variance decomposition analysis. In addition to domestic variables,
external shocks appear to have a strong influence on inflation and output in Pakistan.
Muhammad Zeeshan Younas. (2020) Pakistan Monetary Policy in terms of Bank Lending and Asset Price Channels, Jinnah Business Review, Volume 8, Issue 2.
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