Monetary Policy in India: Transmission to Bank Interest Rates
June 23, 2015
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Summary
This paper provides new evidence on the credit channel of monetary policy transmission in India. Using stepwise estimation of vector error correction models, the analysis finds significant, albeit slow, pass-through of policy rate changes to bank interest rates in India. There is evidence of asymmetric adjustment to monetary policy: the lending rate adjusts more quickly to monetary tightening than to loosening. In addition, the speed of adjustment of deposit and lending rates to changes in the policy rate has increased in recent years.
Subject: Bank credit, Banking, Central bank policy rate, Deposit rates, Financial services, Money, Prime rates, Repo rates
Keywords: adjustment speed, Bank credit, bank interest, Central bank policy rate, correction term, deposit rate, deposit rates, error correction term, India, lending rate, lending rates, Monetary policy transmission, policy rate cut, prime lending rate, Prime rates, Repo rates, reverse repo, speed of adjustment, target rate, WP
Pages:
33
Volume:
2015
DOI:
Issue:
129
Series:
Working Paper No. 2015/129
Stock No:
WPIEA2015129
ISBN:
9781513598796
ISSN:
1018-5941
