Monetary Condition Index: Empirical Evidence from Pakistan

The study focuses on assessing the Monetary Condition Index (MCI) in Pakistan, which measures tightness or easiness of country's monetary policy. It analyzes impacts interest rates and exchange inflation GDP growth, using time series data from 1975 to 2020. is calculated by data, employing annual set Two different methods are applied find weights rate rate, one Principal Component Analysis other co-integration method Autoregressive Distributed Lag model. research aims provide valuable insights for policymakers, planners, economists optimize policies understand transmission mechanism economy. also explores historical rates, with potential implications economies. introduced as a useful policy locator an indicator stance. Additionally, seeks validate MCI's reliability address certain gaps related its effectiveness, dynamics, generalizability. concluded that MCI sensitive variations, calculation methodology essential. stance Pakistan remained tight 2017 2020, representing highest trend history. However, effectiveness tools control was questioned, suggesting changes might be necessary achieve objectives State Bank line Islamic economics principles.