Economics, Econometrics and Finance
6 years ago

Tight monetary policy after oil shocks leads to significant output loss.

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The Pakistan Development Review
Oil Price Shocks, Systematic Monetary Policy and Economic Activity
Muhammad Zeshan, Wasim Shahid Malik, Muhammad Ali Nasir

Paper Summary

Oil price shocks in Pakistan lead to a decrease in economic output. The country's tight monetary policy, triggered by these shocks, plays a significant role in this output loss. Around 42 percent of the decrease in output is due to the restrictive monetary policy. To lessen the impact of oil price shocks, Pakistan's central bank could consider reducing its market interventions.

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