Excess interbank liquidity in Pakistan hinders effectiveness of monetary policy.
The study looked at how changes in interest rates and required reserves affect lending rates in Pakistan. They found that changes in required reserves don't fully impact lending rates, but do affect deposit rates and exchange rates in the long term. The discount rate isn't very effective in influencing monetary policy due to excess liquidity in Pakistan's interbank market. Overall, there seems to be a significant change in how money moves in Pakistan's interbank market.