Enterprises Growth and Monetary Policy Asymmetric Effect: Evidence from Pakistan

Abstract

This study investigates the impact of monetary policy on the growth of non-financial firms in the case of Pakistan. A sample size of 45 companies from different sectors has been taken. The data set taken for this study ranges from 2001 to 2016 while it is annual in nature. The study uses a GMM model for the estimation process. The monetary policy variables include interest rate, exchange rate, and money supply. The study showed different results regarding different sectors, which includes leather and tanneries and glass and ceramics interest rate have a negative relation with the 6 selected firms of these sectors. The other sectors have positive and significant results with any change in interest rate. Food and personal and glass and ceramics have insignificant results with any change in Exchange rate. The coefficient of Sugar, Refineries, Transport, and chemicals have negative signs and results are steady with the study. The third variable money supply has mixed result in different sectors, some of which shows positive result while some are showing a negative association with the money supply. Synthetic and rayon, Refineries, fertilizer cement, and automobile have negative relations while the rest have been found to have a positive relation.