Abstract/Description
A significant body of literature explores and establishes the impact of monetary policy on output and prices, at least in the short run. However, the subsequent question is whether this effect is symmetric concerning the various states of the economy (see, Tenreyro and Thwaites, 2016; Bernstein, 2021; Eichenbaum et al., 2022; among others). This study contributes to the literature on state-dependent (non-linear) effects of unanticipated monetary policy shocks according to two important features of the economy. The amount of slack in the economy and the amount of the public-sector footprint in the market. Evaluating state-dependent effects is crucial because assuming symmetric effects under a different economic state for any policy action might not yield the expected results for policymakers. While substantial literature exists on this topic primarily focusing on the United States and other developed countries. However, this area remains largely unexplored in Pakistan. This study aims to address this gap by examining the asymmetric response of output to changes in monetary policy in Pakistan.
Keywords
Monetary policy, Asymmetry, Non-linearity
Location
S1 room, Adamjee building
Session Theme
Evolving Dynamics in Inflation, Monetary and Fiscal Policy
Session Type
Parallel Technical Session
Session Chair
Kalim Hyder, State Bank of Pakistan
Session Discussant
Ilfan Oh, Institute of Business Administration ; Karim Khan, Pakistan Institute of Development Economics
Start Date
10-12-2024 3:15 PM
End Date
10-12-2024 5:15 PM
Recommended Citation
Ali, H. (2024). Monetary Policy in Good Times and in Bad: Empirical Evidence from Pakistan. CBER Conference. Retrieved from https://ir.iba.edu.pk/esdcber/2024/program/21
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Included in
Monetary Policy in Good Times and in Bad: Empirical Evidence from Pakistan
S1 room, Adamjee building
A significant body of literature explores and establishes the impact of monetary policy on output and prices, at least in the short run. However, the subsequent question is whether this effect is symmetric concerning the various states of the economy (see, Tenreyro and Thwaites, 2016; Bernstein, 2021; Eichenbaum et al., 2022; among others). This study contributes to the literature on state-dependent (non-linear) effects of unanticipated monetary policy shocks according to two important features of the economy. The amount of slack in the economy and the amount of the public-sector footprint in the market. Evaluating state-dependent effects is crucial because assuming symmetric effects under a different economic state for any policy action might not yield the expected results for policymakers. While substantial literature exists on this topic primarily focusing on the United States and other developed countries. However, this area remains largely unexplored in Pakistan. This study aims to address this gap by examining the asymmetric response of output to changes in monetary policy in Pakistan.