|This paper examines whether stock prices, exchange rates and monetary policy are related to one another or not. The study uses monthly data of return from stock of banks of Pakistan and real exchange rates of Euro, Pound, US dollar, Yen and Yuan and T-bills rate. We employed vector autoregressive model (VAR) to examine the relationship between monetary policy, stock prices and exchange rates. Additionally Philips- Parren (PP), Dickey-Fuller (DF) and Augmented Dickey-Fuller test were applied to indentify the appropriate lag length. Analysis of results show that no relation exists from banking stock prices to exchange rate as stated by many researchers but relation existed from exchange rate to banking stock prices. There exists a relation between banking stock prices to t-bills rate but not for t-bill to banking stock prices except for MEBL further more the relation between exchange rate to t-bill rate existed but not for t-bill to exchange rate.