THE REGIONAL ASYMMETRIC RESPONSES TO CENTRAL BANK’S MONETARY POLICY IN PAKISTAN

2017 ◽  
Vol 65 (02) ◽  
pp. 351-364
Author(s):  
NASEEM FARAZ ◽  
ZAINAB IFTIKHAR
Keyword(s):  
Monetary Policy ◽  
Impulse Response Functions ◽  
Response Functions ◽  
Structural Vector Autoregression ◽  
Monetary Policy Shocks ◽  
Limited Evidence ◽  
Svar Model ◽  
Policy Shocks ◽  
National Output ◽  
Structural Vector

Literature on differential impacts of monetary policy across regions discusses several factors which may be responsible for asymmetrical effects of monetary policy. As far as Pakistan is concerned, limited evidence is available for both mechanism and impact of monetary policy. In this study, we examine asymmetries in responses of real output of provinces to central bank’s monetary policy in Pakistan. We also attempt to explore the potential sources of these asymmetries. The Structural Vector Autoregression (SVAR) model is employed to examine each province’s response to unanticipated monetary policy shocks. The generalized impulse response functions from SVAR reveal that monetary policy has varied effects across the provinces. In two regions — Punjab and Sindh — monetary policy shocks cause variations in provincial outputs in similar ways. These responses are also comparable to the response of national output to changes in monetary policy but with considerable differences in magnitudes. While other provinces Khyber Pakhtunkhawa (KPK) and Balochistan show less sensitivity to unanticipated change in monetary policy. The less sensitive regions exhibit dissimilar responses both in timings and magnitudes. These dissimilarities in regional responses draw attention to devise an effective national monetary policy that might consider the cross-provincial differences in responses to central monetary policy in Pakistan.

scholarly journals SVAR ANALYSIS OF THE IMPACTS OF CORPORATE TAXATION ON THE MACRO ECONOMY OF LITHUANIA

Ekonomika ◽  
2012 ◽  
Vol 91 (4) ◽  
Author(s):  
V ioleta Klyvienė ◽  
Jaunius Karmelavičius
Keyword(s):  
Fiscal Policy ◽  
Corporate Taxation ◽  
Empirical Literature ◽  
Impulse Response Functions ◽  
Response Functions ◽  
Structural Vector Autoregression ◽  
Svar Model ◽  
Capital Tax ◽  
The Impact ◽  
Structural Vector

Abstract. This study aims to investigate the effects of tax policy on the macroeconomic variables of Lithuania. Special attention is devoted to conclusions concerning the impact of corporate taxation. The methodological framework is structural vector autoregression models identified using the Cholesky and Blanchard–Perotti approaches. Investigations of the impact of fiscal policy have been scarce in the empirical literature of Lithuania. The authors of this article use the methodology of assessing the impacts of fiscal policy that has not been used in Lithuania so for.JEL classification: E62, H25, F21.Key words: SVAR model, impulse response functions, fiscal policy, capital tax, investment

scholarly journals Variations in the Effects of a Single Monetary Policy: The Case of Russian Regions

2021 ◽  
Vol 80 (1) ◽  
pp. 3-45
Author(s):  
Vadim Napalkov ◽  
◽  
Anna Novak ◽  
Andrey Shulgin ◽  
◽  
...  
Keyword(s):  
Monetary Policy ◽  
Manufacturing Sector ◽  
Model Specification ◽  
Impulse Response Functions ◽  
Russian Regions ◽  
Monetary Policy Shocks ◽  
Regional Heterogeneity ◽  
Core Inflation ◽  
Policy Shocks ◽  
Exchange Rate Shocks

This research analyses regional heterogeneity in the reaction of core inflation to shocks of a single monetary policy on the example of Russia. We use a global vector autoregression model to reveal impulse response functions of core inflation in Russian regions to monetary policy shocks. The average 5-year cumulative response of regional core inflation to a MIACR shock of 1 percentage point (pp) is ‒0.74 pp. For 77 out of 80 regions, the 5-year cumulative core inflation response is found to be statistically significant. If we exclude three statistically insignificant responses and discard the four regions with the highest and lowest responses, we get a spread of ‒0.55 to ‒0.93 pp with a standard deviation of 0.12. We show that, over a one-year horizon, the heterogeneous response to monetary policy shocks can moderately reduce the heterogeneity of the response of regional inflation to exchange rate shocks. However, the magnitude of this effect is limited. According to the analysis of the regional heterogeneity factors, the higher are the share of extractive industries in the gross regional product of a region, the share of loans to manufacturing sector, the share of loans to small enterprises, as well as the unemployment rate, the stronger will be the reaction of the core inflation to the monetary policy shock. The degree of heterogeneity in the Russian regions’ core inflation response to monetary policy shocks, the set of factors explaining this heterogeneity, and the explained variation in the regional response (30–40% depending on the model specification) turn out to be comparable to similar indicators in other countries with pronounced regional heterogeneity.

Monetary policy and macroeconomic responses: non-recursive SVAR study of Egypt

2019 ◽  
Vol 11 (3) ◽  
pp. 319-337
Author(s):  
Mohamed Aseel Shokr ◽  
Zulkefly Abdul Karim ◽  
Mohd Azlan Shah Zaidi
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Monetary Policy Shocks ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Svar Model ◽  
Policy Shocks ◽  
Effect Of Monetary Policy ◽  
Foreign Shocks

Purpose This paper aims to examine the effects of monetary policy and foreign shocks on output, inflation and exchange rate in Egypt. Design/methodology/approach This paper studies the effects of monetary policy and foreign shocks on output, inflation and exchange rate by using non-recursive SVAR model and quarterly data. Findings First, the empirical results reveal that monetary policy shocks, through changes in interest rate or money supply, have a significant effect on output, inflation and exchange rate in Egypt. Second, the world oil prices and foreign output have significant impacts on output, inflation and exchange rate in Egypt, while foreign interest rate has a significant effect on domestic output and inflation. Research limitations/implications The limitation of the study is examining one country only. Practical implications The Central Bank of Egypt (CBE) should adjust interest rate to stabilize inflation, output and exchange rate. By stabilizing inflation, output and exchange rate, the CBE would be able to achieve the ultimate targets of monetary policy, namely, price stability and economic growth. Social implications It is important for the CBE because it shows the significant effect of monetary policy on macroeconomic variables in Egypt. Also, it is important for people because it shows the important role for the CBE. Originality/value It is important for the CBE because it examines the effect of monetary policy and foreign shocks on macroeconomic variables.

scholarly journals Monetary and Fiscal Policies Interaction in a Large Emerging Economy: Which Is the Leader Policy?

2021 ◽  
Vol 13 (11) ◽  
pp. 77
Author(s):  
Ricardo Ramalhete Moreira ◽  
Edson Zambon Monte
Keyword(s):  
Monetary Policy ◽  
Long Memory ◽  
Fractional Integration ◽  
Fiscal Policies ◽  
Monetary Policy Shocks ◽  
Vector Autoregressive ◽  
Policy Shocks ◽  
The Government ◽  
Structural Vector ◽  
Do So

This article analyzed the intertemporal interaction between monetary and fiscal policies in Brazil. We aimed at identifying if structural innovations to the real interest rate were able to induce unexpected effects on fiscal and inflation dynamics. To do so, we estimated Structural Vector Autoregressive (SVAR) models over the period from Jan/2004 to Apr/2019. Moreover, we filtered out the time series’ long-memory component through a fractional integration approach, so that we did not build our analysis on traditional unit root tests. The findings showed that monetary policy shocks robustly activated an unconventional transmission channel based on the Fiscal Theory of the Price Level, i.e., an unexpected and induced change in primary surpluses, through a wealth effect, as mechanism to satisfy the Government’s intertemporal budget constraint. Such a result is strongly linked to another evidence, that is, the monetary policy`s role as a leader in shaping inflation over time.

scholarly journals Monetary Policy And Long-Term Interest Rates In South Africa

2010 ◽  
Vol 9 (10) ◽  
Author(s):  
Lumengo Bonga-Bonga
Keyword(s):  
South Africa ◽  
Monetary Policy ◽  
Interest Rates ◽  
Impulse Response Functions ◽  
Monetary Policy Shocks ◽  
Vector Autoregressive ◽  
Supply Shock ◽  
Policy Shocks ◽  
Structural Vector Autoregressive Model

This paper examines how short-term and long-term interest rates react to supply, demand and monetary policy shocks in South Africa. Use is made of the impulse response functions obtained from the structural vector autoregressive model with long-term restrictions. We find a positive correlation between the two interest rates after a monetary and demand shock and a negative correlation after a supply shock. The finding of this paper is that the operation of the monetary transmission mechanism should be effective in South Africa. Furthermore, this paper provides an approach to identify supply shocks in the South African business cycle.

scholarly journals Monetary and Fiscal Policies Interaction in a Large Emerging Economy: Which Is the Leader Policy?

2021 ◽  
Vol 13 (11) ◽  
pp. 81
Author(s):  
Ricardo Ramalhete Moreira ◽  
Edson Zambon Monte
Keyword(s):  
Monetary Policy ◽  
Long Memory ◽  
Fractional Integration ◽  
Fiscal Policies ◽  
Monetary Policy Shocks ◽  
Vector Autoregressive ◽  
Policy Shocks ◽  
The Government ◽  
Structural Vector ◽  
Do So

This article analyzed the intertemporal interaction between monetary and fiscal policies in Brazil. We aimed at identifying if structural innovations to the real interest rate were able to induce unexpected effects on fiscal and inflation dynamics. To do so, we estimated Structural Vector Autoregressive (SVAR) models over the period from Jan/2004 to Apr/2019. Moreover, we filtered out the time series’ long-memory component through a fractional integration approach, so that we did not build our analysis on traditional unit root tests. The findings showed that monetary policy shocks robustly activated an unconventional transmission channel based on the Fiscal Theory of the Price Level, i.e., an unexpected and induced change in primary surpluses, through a wealth effect, as mechanism to satisfy the Government’s intertemporal budget constraint. Such a result is strongly linked to another evidence, that is, the monetary policy`s role as a leader in shaping inflation over time.

scholarly journals The Monetary Transmission Mechanism: An SVAR Analysis of the Four Municipalities in China

2017 ◽  
Vol 5 (1) ◽  
pp. 81
Author(s):  
Lili Wu ◽  
Mingxu Li
Keyword(s):  
Monetary Policy ◽  
Housing Demand ◽  
Monetary Policy Shocks ◽  
Monthly Data ◽  
Vector Autoregressive ◽  
Supply Shocks ◽  
Svar Model ◽  
Policy Shocks ◽  
Transmission Of Monetary Policy

This paper explores the role of housing markets in the transmission of monetary policy shocks across four Chinese municipalities, namely Beijing, Shanghai, Tianjin, and Chongqing. The analysis is based on identification of housing demand shocks, monetary policy shocks and credit supply shocks through a Structural Vector Autoregressive (SVAR) model estimated using monthly data for four cities from July 2005 to December 2015. The empirical results show great differences in the four cities as far as the housing market is concerned. They also indicate that housing plays a stronger role in the transmission of monetary policy shocks in Beijing and Shanghai than in Tianjin and Chongqing. These results are reasonably robust across several model specifications.

scholarly journals Monetary Policy, Real Activity, and Credit Spreads: Evidence from Bayesian Proxy SVARs

2019 ◽  
Vol 11 (1) ◽  
pp. 157-192 ◽  
Author(s):  
Dario Caldara ◽  
Edward Herbst
Keyword(s):  
Monetary Policy ◽  
Credit Spreads ◽  
Monetary Shocks ◽  
Structural Vector Autoregression ◽  
Monetary Policy Shocks ◽  
Real Activity ◽  
Financial Conditions ◽  
Corporate Credit ◽  
Policy Shocks ◽  
Jel C32

In this paper, we develop a Bayesian framework to estimate a proxy structural vector autoregression to identify monetary policy shocks. We find that during the Great Moderation period, monetary policy shocks induce a persistent decline in real activity and tightening in financial conditions. Central to this result is a systematic component of monetary policy characterized by a direct and economically significant reaction to changes in corporate credit spreads. The failure to account for this endogenous reaction induces an attenuation in the response of all variables to monetary shocks, a result that also applies to the narrative identification of Romer and Romer (2004). (JEL C32, E23, E32, E44, E52, E58)

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