Saumitra, Bhaduri and Toto, Goyal (2012): The bank lending channel of monetary policy transmission: evidence from an emerging aarket, India.
Download (490Kb) | Preview
This study analyzes the monetary policy transmission in India with the help of bank lending channel hypothesis. We test the shift in loan supply emanating from the changes in the prime policy rate used by the Reserve Bank of India. Using yearly bank balance sheet data from 1996 to 2007, the paper provides evidence of an operational BLC in India. Further, segregating banks by asset size and liquidity, we find that small, illiquid banks are more affected by policy changes, and the effect is more pronounced in areas of non-priority sector lending. Finally, the domestically owned banks are more sensitive to policy rate changes vis-à-vis foreign banks.
|Item Type:||MPRA Paper|
|Original Title:||The bank lending channel of monetary policy transmission: evidence from an emerging aarket, India|
|Keywords:||Bnak lending Channel India|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation|
|Depositing User:||Saumitra Bhaduri|
|Date Deposited:||11. Apr 2012 14:24|
|Last Modified:||14. Feb 2013 10:15|
Arellano, Manuel and Bond, 1991 Stephen, Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations, The Review of Economic Studies, 1991, 58, pp. 277-297.
Arellano, Manuel and Bover, 1995, Olympia, Another look at the instrumental variable estimation of error-component models, Journal of Econometrics, vol. 68, issue 1, pp. 29-51.
Bernanke, B.S. and A. S. Blinder, 1992, The Federal Funds Rate and the Channels of Monetary Transmission, The American Economic Review, Vol.82, No.4, pp. 901-921.
Bernanke, B.S. and A. S. Blinder, 1988, Credit, Money and Aggregate Demand, The American Economic Review, Vol. 78, No. 2, pp. 435-439.
Bernanke, B. and M. Gertler, 1995, Inside the black box: the credit channel of monetary policy transmission, The Journal of Economic Perspectives, Vol.9, No.4, pp. 27-48.
Blundell, R and S, Bond, 1998, Initial conditions and moment restrictions in dynamic panel data models, Journal of Econometrics, 1998, 87: 115-143.
Cetorelli, N. and Linda S. Goldberg, 2008, Banking Globalization, Monetary Transmission, and the Lending Channel, NBER working paper, No. 14101.
Ehrmann M., L. Gambacorta, J. Martinez-Pagés, P. Sevestre and A. Worms, 2001, Financial Systems and the Role of Banks in Monetary Policy Transmission in the Euro Area, ECB Working Paper, No. 105.
Hansen, B. E., 2000, Sample Splitting and Threshold Estimation, Econometrica, Vol. 68, No. 3, pp. 575-603.
Kashyap, A.K., J.C. Stein and D.W. Wilcox, 1993, 'Monetary policy and credit conditions: Evidence from the composition of external finance,' American Economic Review, vol.83 1: 78-98.
Kashyap, A. K. and J. C. Stein 1995, “The Impact of Monetary Policy on Bank Balance Sheets,” Carnegie-Rochester Conference Series on Public Policy, 42,151-195.
Kashyap, A.K. and J.C. Stein, 2000, ‘What do a million observations on banks say about the transmission of monetary policy?’ American Economic Review, vol.90 (3): 407-28.
Kishan, R.P. and T.P. Opiela, 2000, Bank Size, Bank Capital, and the Bank Lending Channel, Journal of Money, Credit, and Banking, Vol. 32, No.1, pp. 121-141.
Pandit, B. L., A. Mittal, M. Roy, and S. Ghosh, 2006, Transmission of Monetary Policy and the Bank Lending Channel: Analysis and Evidence for India, Development Research Group Study, No. 25.
Westerlund, J., 2003, A Panel Data Test of the Bank Lending Channel in Sweden. Department of Economics, Lund University.