The Impact of Monetary Policy on Financial Performance: Evidence from Banking Sector of Pakistan

Journal of Basic and Applied Scientific Research, 4(8)119-124, 2014

6 Pages Posted: 28 Oct 2014

See all articles by Rashid Zaman

Rashid Zaman

Lincoln University New Zealand

Muhammad Arslan

Bahria University Alumnus; Lincoln University (NZ)

Muhammad Sohail

Bahria University

R. K. Malik

Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST)

Date Written: October 26, 2014

Abstract

Interest rate an important indicator of monetary policy always has major impact on financial sector performance. The purpose of this paper is to enlightened the monetary policy effect on banking sector stability and performance by investigating the casual relationship between interest rate imposed by state bank of Pakistan and bank financial performance taken as ROA and ROE. Highlighting the importance of monetary policy in banking sector, this study shall focus in depth over its impact on performance of banking industry of Pakistan by studying monetary transmission over the past five year (2007-2011), using interest rate as its measure. Using correlation analysis followed by ordinary Least Square regression carries the empirical analysis of the study. Firm size is taken as control variables for the study as firm size have significant impact on financial performance of banks. The finding of study reveal that interest rate taken as measure for monetary policy has significant inverse relationship on firm financial performance measured, which is measured by ROA and ROE.

Keywords: Monetary Policy, Interest rate, Return on assets, Return on Equity

Suggested Citation

Zaman, Rashid and Arslan, Muhammad and Sohail, Muhammad and Malik, R. K., The Impact of Monetary Policy on Financial Performance: Evidence from Banking Sector of Pakistan (October 26, 2014). Journal of Basic and Applied Scientific Research, 4(8)119-124, 2014. Available at SSRN: https://ssrn.com/abstract=2515079 or http://dx.doi.org/10.2139/ssrn.2515079

Rashid Zaman

Lincoln University New Zealand ( email )

Ellesmere Jct Rd, Lincoln 7647
Chrsitchurch, 7647
New Zealand

Muhammad Arslan (Contact Author)

Bahria University Alumnus ( email )

44000 Islamabad
Pakistan
+923317500173 (Phone)

HOME PAGE: http://www.muhammadarslan.info/

Lincoln University (NZ) ( email )

PO Box 85084
Ellesmere Junction Road/Springs Road
Lincoln, 7647
New Zealand

Muhammad Sohail

Bahria University ( email )

E.8 Shangrilla Road
Naval Complex
Islamabad, 44000
Pakistan

R. K. Malik

Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST) ( email )

90 and 100 Clifton
Karachi, ISLAMABAD 75600
Pakistan

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