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Monetary Policy and the Survival Analysis of the Firms in Pakistan

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  • Shabbir, Safia

Abstract

Using the information on 629 companies listed at Karachi stock exchange over a period of 40 years (1975-2014), this study finds out the effect of monetary policy and industrial dynamics over the hazard rate of both the financial and non-financial companies. The study concludes that monetary contraction increases the probability of exit of the companies by 44 percentage points, while LSM growth and age reduces the hazard rate. Further companies in textiles are most likely to exit, while firms working in food & beverages, cement & construction and chemical & engineering are less likely to exit. On the other hand, credit growth increases the risk of exit for the financial companies and rise in weighted average lending rate reduces the probability of exit. Moreover, well-established companies are less likely to leave the market.

Suggested Citation

  • Shabbir, Safia, 2017. "Monetary Policy and the Survival Analysis of the Firms in Pakistan," MPRA Paper 122928, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:122928
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    File URL: https://mpra.ub.uni-muenchen.de/122928/1/MPRA_paper_122928.pdf
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    References listed on IDEAS

    as
    1. Ali Choudhary & Amjad Ali & Shah Hussain & Vasco J. Gabriel, 2012. "Bank Lending and Monetary Shocks: Evidence from a Developing Economy," SBP Working Paper Series 45, State Bank of Pakistan, Research Department.
    2. Giorgia Giovannetti & Giorgio Ricchiuti & Margherita Velucchi, 2011. "Size, innovation and internationalization: a survival analysis of Italian firms," Applied Economics, Taylor & Francis Journals, vol. 43(12), pages 1511-1520.
    3. P. Holmes & A. Hunt & I. Stone, 2010. "An analysis of new firm survival using a hazard function," Applied Economics, Taylor & Francis Journals, vol. 42(2), pages 185-195.
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    More about this item

    Keywords

    Monetary Policy; Firm behaviour; Hazard Rate; Survival Analysis;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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