State Bank of Pakistan Policies and The Lending Behavior of Commercial Banks: A Case of Pakistan from 1972-2021

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  • Fizza Malik Lahore School Of Economics


Broad Money, Loan Growth, Monetary Policy


This paper aims to investigate the impact of various monetary policy tools used by the State Bank of Pakistan on the lending behaviour of commercial banks by applying a series of econometric tests on the data. A time series data is collected from 1972 to 2021 to see the impact. The approach that is used to estimate the econometric model is ARDL (Auto Regressive Distributed Lag Model). The paper sheds light on the policies under taken by the state bank in the monetary stance that has either a direct or an indirect effect on the volume of loan growth. It is hence found that in times of expansionary monetary policy the level of private credit given increases. The main finding of this study is that growth in broad money means more credit and vice versa. More money means more credit. The research concludes that the instruments of control are effective only in the long run. The expansionary monetary policy has resulted in the opposite direction is supported by literature. Moreover, the growth is broad money has a positive and significant result in the model.  The key implication of the findings is that credit to the private sector is an effective channel for monetary policy transmission in Pakistan. It is recommended therefore that monetary authorities in developing countries should consider credit as a major channel for implementing monetary policies. It is hence recommended that monetary authorities in developing countries should credit as a major channel for implementing policies in the monetary framework.


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How to Cite

Malik, F. (2022). State Bank of Pakistan Policies and The Lending Behavior of Commercial Banks: A Case of Pakistan from 1972-2021. Journal of Academic Opinion, 2(2), 67–73. Retrieved from