Abstract
Purpose - The common mistake in Monetary policy transmission mechanism (MPTM) analysis is the fallacy of composition, the error of attributing what applies in the case of one to the case of many because the role and nature of Monetary policy (MP) varies across the countries according to their structure and level of development. The purpose of this paper is to identify the transmission channels of MP and their speed of adjustment in selective SAARC countries. Design / Methodology / Approach - The study identified the importance of each channel in SAARC countries for the period of 2005Q1-2020Q4. The Authors considered four pertinent channels through which monetary policy transmits its impact to the real economy (GDP and Inflation) namely interest rate channel, credit channel, exchange rate channel and asset price channel. For this purpose, structural vector auto regression approach (SVAR) is used. Findings - Based on the empirical estimates, the Authors find the effectiveness of monetary policy to influence the aggregate output of the economy in SAARC countries i.e., GDP and prices. The study also finds that the exchange rate channel is the most important channel in Pakistan and Sri Lanka whereas interest rate channel and the credit channel are
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Article Details
- Year: 2025
- Volume: 46
- Issue: 4
- Pages: 161 - 208
- Accepted: 30.12.2024
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DOI:
https://doi.org/10.5281/zenodo.17711502 -
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How to Cite?
Anis Kabir, Syed Muhammad Abdul Rehman Shah, M. Kabir Hassan, Mohammad Irfan (2025). The Effectiveness of Monetary Policy Transmission Channels: An Empirical Investigation of SAARC Countries. Journal of Economic Cooperation and Development, 46(4), 161-208. https://doi.org/10.5281/zenodo.17711502
