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Monetary policy goals in any country are to accomplish economic and social goals to achieve financial prosperity. The study determined the impact of monetary policy tools on bank’s Credit Risk, which was previously unexplored. The analytical and econometrical design was adopted in this study. Descriptive statistics, correlation matrix, CD test, and DK regression were employed to determine the impact of monetary policy instruments on the bank’s Credit Risk. Multivariate statistical techniques were used to evaluate balanced panel data from 22 banks currently operating in Pakistan cover the span of 2009-2021. Banks were declared cross-sectionally dependent. ROE was positively associated with MG, ROA was negatively linked with INF in the Correlation Matrix. The overall research explored that PR and MG had a positive impact on ROE and ROA, but SLR showed an inverse impact on Credit Risk. This research used a large number of banks as a novel component in Pakistan’s context and filled a gap in the country’s banking literature. The paper will assist the government, managers of the banking industry, monetarists, stakeholders, investors, academicians, and researchers. This study could be extremely helpful to regulators in formulating favorable policy rates that fulfill Pakistan’s economic targets.
Shahid et al. (Sat,) studied this question.