Monetary Policy and Industry Performance: Empirical Evidences from Karachi Stock Exchange (KSE) of Pakistan

Abstract

The purpose of this study is to deliberate the impact of monetary policy based on interest rates on the industry performance of Karachi Stock Exchange (KSE) listed corporations of Pakistan. This study caters to estimate the effect of interest rate on industry performance using Return on Asset (ROA) from 2001-12 using three different sectors: Industrial Engineering, Oil and Gas Producers and Industrial Metals and Mining. The empirical results show that changing interest rate by the government has implications on the ROA. The expansionary monetary policy, where interest rates are relatively lower are showing relatively higher ROA as compared to that of contractionary monetary policy. The data has been taken from the secondary sources like Karachi Stock Exchange, State Bank of Pakistan, and annual reports of corporations of the given sectors.

Keywords: Interest rate, Return on Asset, Karachi Stock Exchange, State Bank of Pakistan