Transmission Mechanism of Monetary Policy: Case Study of Interest Rate Channel in India
Journal Title: PRAGATI: Journal of Indian Economy - Year 2017, Vol 4, Issue 2
Abstract
In India, prior to 1991, the tightly controlled interest rates caused impediments in the functioning of the interest rate channel of monetary policy transmission while after 1991, the RBI undertook various measures to strengthen the market-determination of interest rates. This paper has examined the evolution of the interest channel in India across the period 1985 to 2014 firstly by studying the interest rate pass-through using the Correlation matrix and the OLS technique and secondly, by studying the transmission of policy rates to the real economy using the reduced VAR model. The results show that the transmission of interest rates pass-through from policy rates to market interest rates (both - short-term as well as long-term) has strengthened while desired impact of long term market interest rates on industrial production and inflation appears to be weak.
Authors and Affiliations
Prakash Anant Salvi, Davinder Kaur Suri
The Profitability of Indian Tourism Sector: A Fixed Model Panel Analysis
The current paper tests the applicability of the SCP framework i.e. industrial structure, conduct and performance in the Indian tourism industry. Herfindahl-Hirshman Index was used to understand concentration index for t...
Trends and Pattern of Population Ageing in India and West Bengal: A Comparative Study
Population ageing is a global issue which has multi-dimensional impacts on all economic issues of a nation. It is related to many demographic and vital statistics, economic status, health and social status of population....
Saving and Investment Pattern of Rural Households of Himachal Pradesh
Investment is one of the foremost concerns of every individual investor as their small savings of today are to meet the expenses of tomorrow. The savings and investments pattern by the people vary from person to person a...
An Analysis of Diseases Burden and Out of Pocket Health Expenditure among South Asian Countries
Health is an important determinant of human development, which is about enhancing freedom of human beings. Good health brings freedom to people to enjoy their life and attain desires. Incidence of diseases curtails this...
Impact of Monetary Policy on GDP of India
Monetary policy is a measure which is decided by the Apex bank to regulate currency supply and credit control in the Indian economy where as gross domestic product (GDP) is an indicator of growth and development of the e...