Munich Personal RePEc Archive

Impact of Interbank Liquidity on Monetary Transmission Mechanism: A Case Study of Pakistan

Muhammad, Omer and de Haan, Jakob and Scholtens, Bert (2014): Impact of Interbank Liquidity on Monetary Transmission Mechanism: A Case Study of Pakistan.

[img]
Preview
PDF
wp70.pdf

Download (916kB) | Preview

Abstract

We investigate the transmission mechanism of policy-induced changes in the discount rate and required reserves in Pakistan. Our results suggest that the pass through to the lending rate is complete for the discount rate but incomplete for required reserves. However, only shocks to required reserves have an effect on the deposit rate and the exchange rate in the long run. The observation that the discount rate is not a very effective monetary policy tool is attributed to excess liquidity present in the interbank market of Pakistan. Finally, our findings suggest a structural shift in the interbank money market in Pakistan.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.