Impact of Monetary Policy on Stock Exchange in Pakistan: Maturity Wise Data Analysis

This study examines the role of discount rate in monetary policy through different deposit rates in Pakistan. The discount rate is the key to monetary policy of a country. The monetary structure of it is not much strong as compared to developed countries. Time series data is used from 1980 to 2016. Augmented Dickey Fuller (ADF) and Phillips Perron (PP) unit root test are applied for checking the stationary condition of the variables. The results of both tests confirm that all variables are of stationary at first differences. Therefore for the long run relationship among the integrated series is determined by applying the Engle and Granger method. This study finds incomplete and asymmetric adjustment of interest rate pass through and there is ascending rigidity in deposit rates of the country. This study suggests a strong monetary policy in the country to a wide-ranging and effective role of discount rate in Pakistan