Influence Monetary Policy on Economic Growth: An Evidence from Pakistan

Abstract

The study's basic goal is to examine the effect of monetary policy on economic growth in context of the Pakistan. Annual data for analysis is used from 1972 to 2018. Johanson Co-integration analysis and Granger Causality Test are applied to get the results. Outcomes of the Bi-Variate Co-integration analysis show that bi-variate co-integration relation exist between the all the variables GDP MS, GDP DI, GDP FDI, GDP LF, MS DI, MS FDI, MS LF, DI FDI, DI LF and FDI LF in the long run. Findings of Pairwise Granger Causality Tests reveals that bi-directional Granger causality is present between the Gross Domestic Product (GDP) and Money Supply (MS). The uni-directional relationship exists between the GDP and DI, FDI and GDP, LF and GDP, DI and MS. Bi-directional Granger causality between the FDI and DI exist in the economy of Pakistan. Uni-directional Granger causality is present between LF and DI, and LF and FDI