Munich Personal RePEc Archive

Monetary Transmission in Pakistan: The Balance Sheet Channel

Shabbir, Safia (2012): Monetary Transmission in Pakistan: The Balance Sheet Channel.

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Abstract

Using data of non-financial listed firms over a period of 1999-2010, this paper investigates the effectiveness of balance sheet channel in monetary transmission mechanism in Pakistan. By classifying firms as SME and large, this paper finds a strong evidence for the existence of net worth channel in Pakistan. A tight monetary policy worsens the net worth of both the SME and large firms, with SME getting more hit thereby further affecting their cash flows, short-term borrowing, and revenues.

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