Do the Islamic banks play a role in the monetary policy transmission in Pakistan? A comparative analysis with conventional banks using panel data analysis

In Pakistan, bank lending plays a critical role in economic activities due to the scarcity of stocks and bond options. Islamic banks face an extra layer difficulty with limited open market instruments lender last resort facilities, as well tough competition conventional banks. This study analyzes differences by transmitting monetary policy modeling credit dependent variable while bank-specific assets, liquidity, capital growth, inflation, rates explanatory variables. Polled OLS fixed effect panel data models are used analyze annual for 2009-2018. The finds that is influenced significantly rates, liquidity. Conventional affected inflation but liquidity less correlated. paper concluded significant transmission. However, tools operations contracts affect equity which may suffer long-term participation.