Monetary Conditions Index: A Composite Measure of Monetary Policy in Pakistan

Pakistan Development Review, Vol. 41, No. 4, Winter 2002

16 Pages Posted: 7 Mar 2007

Abstract

This paper estimated Monetary Conditions Index (MCI) of inflation variable for Pakistan by using monthly data from June 1990 to June 2001. Before calculating MCI we have estimated weights of interest rate and exchange rate to be used in the construction of MCI. For this purpose we used unit root analysis and Johenson (1988) maximum likelihood method base on vector autoregressive technology. The estimated monetary conditions ratio for Pakistan is around 2.79:1. Finally we have constructed the MCI by utilising the estimated weights of rate of interest and exchange rate. The analysis indicate overall tight monetary policy during the decade. However there is some easing spell during 1997 to 1999. This shows the determinedness of monetary authorities with objective of keeping inflation low. Low inflation at the end of the decade indicates the success of monetary authorities in the conduct of monetary policy in achieving the target of low inflation.

Keywords: Monetary Conditions Index (MCI), Monetary policy, Cointegraion, Pakistan

Suggested Citation

Qayyum, Abdul, Monetary Conditions Index: A Composite Measure of Monetary Policy in Pakistan. Pakistan Development Review, Vol. 41, No. 4, Winter 2002. Available at SSRN: https://ssrn.com/abstract=967561
No contact information is available for Abdul Qayyum

Register to save articles to
your library

Register

Paper statistics

Downloads
213
Abstract Views
1,469
rank
144,234
PlumX Metrics