Though the recent global financial crisis has raised many doubts about the effectiveness of monetary policy, it is still used as the main policy tool for macroeconomic management by a vast majority of policy makers around the world. Early attempts to model monetary policy framework combined a linear dynamic system describing the economy and a quadratic loss function summarizing monetary policy objectives of the central bank. On the empirical side, vector autoregressive (VAR) methodology has been widely employed to analyze the impact of monetary policy actions on the macroeconomy. The linear-quadratic framework and the VAR methodology however embody certain implicit assumptions on the response of economic variables to the actions of monetary authority and on the nature of monetary authority’s reaction function. Specifically, it assumes that economic aggregates (including output, inflation, and employment) respond symmetrically to samesized tight and easy monetary policy shocks, and that the monetary authority also responds symmetrically to a given deviation of economic aggregates above or below their long run trend paths. Additionally, most of the empirical work regarding the impact of monetary policy has so far focused on the aggregate economy, ignoring its differential impact on sub-sectors of the economy. However, both the assumptions emanating from the linearquadratic framework were subsequently challenged and a large body of empirical work emerged that supported asymmetries both in the response of aggregate economy and in the reaction of the monetary authority for a large number of countries. Likewise, the likelihood of variation in the effects of monetary policy at the disaggregated level was soon realized and was tested for many economies of the world. Supervisor:- Dr. Mazhar Iqbal