期刊名称：Scientific Annals of the “Alexandru Ioan Cuza” University of Iasi – Economic Sciences Series
印刷版ISSN：2501-1960
电子版ISSN：2501-3165
出版年度：2021
卷号：68
期号：3
页码：333-344
DOI：10.47743/saeb-2021-0019
语种：English
出版社：Sciendo
摘要：It is common practice that central banks around the world must adopt an inflation targeting framework; based on the assumption that inflation could be reduced by increasing interest rates. On contrary, the theoretical literature and data-based evidences differ remarkably. The arduous attached in finding the true association and causation is the existence of multiple monetary transmission channels. Theoretical literature lists both monetary and non-monetary channels linking interest rate and inflation. However, most of the existing studies are focused on single equation model ignoring other parallel channels. This study is first of its kind where we have developed modified Peter and Clark (PC) algorithm of the Graph-Theoretic approach taking all the monetary and non-monetary channels to determine the causal nexus between monetary policy and inflation. The results show that, causality is running from interest rate towards inflation; suggesting a positive and significant long run relationship of interest rate with inflation in case of Pakistan. Furthermore, monetary policy have cost-side effects on inflation; however, the monetary policy becomes counterproductive whenever high interest rate is used to decrease cost push inflation. Therefore, there is need of serious rethinking about current monetary policy regime. JEL Codes - E4; E5; E42; E52
