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This study examines the impact of monetary policy on economic growth in Pakistan. The study uses ... more This study examines the impact of monetary policy on economic growth in Pakistan. The study uses time-series data covering the range of 1991 to 2011.The effects of stochastic shocks of each of the endogenous variables are explored using Error Correction Model (ECM). The study shows that Long run relationship exists among the variables. Also, the core finding of this study shows that inflation rate, exchange rate and external reserve are significant monetary policy instruments that drive growth in Pakistan. It is therefore recommended that the establishment of primary and secondary government bond markets that can also increase the efficiency of monetary policy and reduce the government's need to rely on the central bank for direct financing.
The insights on the long run relationship amongst money, price level and the GDP are of significa... more The insights on the long run relationship amongst money, price level and the GDP are of significant importance for monetary policy formulation in a developing country like Pakistan. Taking into account the vital importance of these three variables, we empirically analyzed the long-run relationship amongst money, price level and GDP in the context of Pakistani economy. Time-series econometric techniques such as unit roots, ARDL and ECM are employed to quarterly data for the year 1972:1 to 2005: IV. ARDL has numerous advantages over the traditional approaches of causality and cointegration. Our results clearly suggest that there is a stable long run relationship amongst money supply (M1), GDP and the CPI in Pakistan. Radical changes in monetary policy in the past have significantly affected the movement of the macro economy in the country.
This study examines the impact of monetary policy on economic growth in Pakistan. The study uses ... more This study examines the impact of monetary policy on economic growth in Pakistan. The study uses time-series data covering the range of 1991 to 2011.The effects of stochastic shocks of each of the endogenous variables are explored using Error Correction Model (ECM). The study shows that Long run relationship exists among the variables. Also, the core finding of this study shows that inflation rate, exchange rate and external reserve are significant monetary policy instruments that drive growth in Pakistan. It is therefore recommended that the establishment of primary and secondary government bond markets that can also increase the efficiency of monetary policy and reduce the government's need to rely on the central bank for direct financing.
The insights on the long run relationship amongst money, price level and the GDP are of significa... more The insights on the long run relationship amongst money, price level and the GDP are of significant importance for monetary policy formulation in a developing country like Pakistan. Taking into account the vital importance of these three variables, we empirically analyzed the long-run relationship amongst money, price level and GDP in the context of Pakistani economy. Time-series econometric techniques such as unit roots, ARDL and ECM are employed to quarterly data for the year 1972:1 to 2005: IV. ARDL has numerous advantages over the traditional approaches of causality and cointegration. Our results clearly suggest that there is a stable long run relationship amongst money supply (M1), GDP and the CPI in Pakistan. Radical changes in monetary policy in the past have significantly affected the movement of the macro economy in the country.