IDEAS home Printed from https://ideas.repec.org/a/sae/jjlobr/v4y2015i1-2p115-125.html
   My bibliography  Save this article

Does CRR and Repo Change Affect Corporate Output?

Author

Listed:
  • Moid U. Ahmad

Abstract

Bank financing is an imperative component of financing the companies. When banks are short on liquidity, this financing activity also tends to go slow. Banks liquidity is dependent upon the policy enforced by the central bank which uses cash reserve ratio (CRR) and Repo rates very frequently to this effect. Since bank credit is dependent on its liquidity position, any change in key policy rates will affect the corporate funding. This is the basic hypothesis which is being tested in this research. The objective of the article is to understand the effect of two important policy rates, Repo and CRR, on corporate output through aggregate sales of the listed companies. The objective was achieved by building a VAR system and doing the required analysis using quarterly data for the time period 2000–2015. One of the important findings was that lag effect is very critical to understand this relationship between policy rates and corporate output and while formulating policies, this should be an important variable to be considered.

Suggested Citation

  • Moid U. Ahmad, 2015. "Does CRR and Repo Change Affect Corporate Output?," Jindal Journal of Business Research, , vol. 4(1-2), pages 115-125, June.
    • Handle: RePEc:sae:jjlobr:v:4:y:2015:i:1-2:p:115-125
    DOI: 10.1177/2278682116664806
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/2278682116664806
    Download Restriction: no
    File URL: https://libkey.io/10.1177/2278682116664806?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ben S. Bernanke & Kenneth N. Kuttner, 2005. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," Journal of Finance, American Finance Association, vol. 60(3), pages 1221-1257, June.
    2. Ikechukwu Kelilume, 2014. "Effects of the Monetary Policy Rate on Interest Rates in Nigeria," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(1), pages 45-55.
    3. Harald Sander & Stefanie Kleimeier, 2006. "Interest Rate Pass‐Through In The Common Monetary Area Of The Sacu Countries," South African Journal of Economics, Economic Society of South Africa, vol. 74(2), pages 215-229, June.
    4. Halil Ibrahim Aydin, 2007. "Interest Rate Pass-Through in Turkey," Working Papers 0705, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    5. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    6. Rigobon, Roberto & Sack, Brian, 2004. "The impact of monetary policy on asset prices," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1553-1575, November.
    7. Rakesh MOHAN, 2008. "The Role of Fiscal and Monetary Policies in Sustaining Growth With Stability in India," Asian Economic Policy Review, Japan Center for Economic Research, vol. 3(2), pages 209-236, December.
    8. Mr. Arto Kovanen, 2011. "Monetary Policy Transmission in Ghana: Does the Interest Rate Channel Work?," IMF Working Papers 2011/275, International Monetary Fund.
    9. Ehrmann, Michael & Fratzscher, Marcel, 2004. "Taking stock: monetary policy transmission to equity markets," Working Paper Series 354, European Central Bank.
    10. George Athanasopoulos & Heather M. Anderson & Farshid Vahid, 2007. "Nonlinear autoregressive leading indicator models of output in G-7 countries," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 63-87.
    11. Michael Hutchison & Rajeswari Sengupta & Nirvikar Singh, 2012. "India’s Trilemma: Financial Liberalisation, Exchange Rates and Monetary Policy," The World Economy, Wiley Blackwell, vol. 35(1), pages 3-18, January.
    12. Basistha, Arabinda & Kurov, Alexander, 2008. "Macroeconomic cycles and the stock market's reaction to monetary policy," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2606-2616, December.
    13. Marotta, Giuseppe, 2009. "Structural breaks in the lending interest rate pass-through and the euro," Economic Modelling, Elsevier, vol. 26(1), pages 191-205, January.
    14. Mita H Suthar, 2008. "Bank Rate and Interest Yield Differentials as Determinants of Foreign Exchange Rate in India," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(2), pages 43-49, May.
    15. Prabheesh, K P & Malathy, D & Madhumathi, R, 2007. "Demand for Foreign Exchange Reserves in India: A Co-integration Approach," MPRA Paper 13969, University Library of Munich, Germany.
    16. Mudabber Ahmed & U. L. G. Rao, 2006. "Vector Autoregression Evidence On Monetarism: A Focus On Some Developing Economies In South Asia," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 51(01), pages 53-66.
    17. Rakesh Mohan, 2008. "The Role of Fiscal and Monetary Policies in Sustaining Growth with Stability in India," Working Papers id:1778, eSocialSciences.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Moid U. AHMAD & Shamima NASRIN, 2017. "An analysis of the effect of monetary policy changes on macroeconomic factors," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(611), S), pages 303-318, Summer.
    2. Alexandros Kontonikas & Alexandros Kostakis, 2013. "On Monetary Policy and Stock Market Anomalies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 40(7-8), pages 1009-1042, September.
    3. Salvatore Perdichizzi, 2017. "The impact of ECBs conventional and unconventional monetary policies on European banking indexes returns," DISCE - Working Papers del Dipartimento di Economia e Finanza def059, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    4. Michael Ehrmann & Marcel Fratzscher & Roberto Rigobon, 2011. "Stocks, bonds, money markets and exchange rates: measuring international financial transmission," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(6), pages 948-974, September.
    5. Alexander Kurov, 2012. "What determines the stock market's reaction to monetary policy statements?," Review of Financial Economics, John Wiley & Sons, vol. 21(4), pages 175-187, November.
    6. Ellis B. Heath & Seth J. Kopchak, 2015. "The Response of the Mexican Equity Market to US Monetary Surprises," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 14(2), pages 87-111, August.
    7. Niko Hauzenberger & Michael Pfarrhofer, 2021. "Bayesian State‐Space Modeling for Analyzing Heterogeneous Network Effects of US Monetary Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(4), pages 1261-1291, October.
    8. Zulkefly Abdul Karim & Mohd Azlan Shah Zaidi, 2015. "Monetary Policy, Firm Size and Equity Returns in An Emerging Market: Panel Evidence of Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 29-55.
    9. Bjørnland, Hilde C. & Leitemo, Kai, 2009. "Identifying the interdependence between US monetary policy and the stock market," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 275-282, March.
    10. Sylvester Eijffinger & Ronald Mahieu & Louis Raes, 2017. "Can the Fed Talk the Hind Legs Off the Stock Market?," International Journal of Central Banking, International Journal of Central Banking, vol. 13(1), pages 53-94, February.
    11. Eijffinger, S.C.W. & Mahieu, R.J. & Raes, L.B.D., 2012. "Can the Fed talk the Hind Legs off the Stock Market? (replaces CentER DP 2011-072)," Discussion Paper 2012-012, Tilburg University, Center for Economic Research.
    12. Dahmene, Meriam & Boughrara, Adel & Slim, Skander, 2021. "Nonlinearity in stock returns: Do risk aversion, investor sentiment and, monetary policy shocks matter?," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 676-699.
    13. Challe, Edouard & Giannitsarou, Chryssi, 2014. "Stock prices and monetary policy shocks: A general equilibrium approach," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 46-66.
    14. Vithessonthi, Chaiporn & Techarongrojwong, Yaowaluk, 2012. "The impact of monetary policy decisions on stock returns: Evidence from Thailand," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(3), pages 487-507.
    15. Kurov, Alexander & Olson, Eric & Zaynutdinova, Gulnara R., 2022. "When does the fed care about stock prices?," Journal of Banking & Finance, Elsevier, vol. 142(C).
    16. Fausch, Jürg & Sigonius, Markus, 2018. "The impact of ECB monetary policy surprises on the German stock market," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 46-63.
    17. Mira Farka, 2022. "The credit channel of monetary policy before and after the zero lower bound: Evidence from the US equity market," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(3), pages 633-693, September.
    18. Sequeira, John M., 2021. "Monetary policy surprises, stock returns, and financial and liquidity constraints, in an exchange rate monetary policy system," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 226-236.
    19. Abdul Karim, Zulkefly & Zaidi, Mohd Azlan Shah & Karim, Bakri, 2011. "Does Firm-Level Equity Return Respond to Domestic and International Monetary Policy Shocks? A Panel Data Study of Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 45, pages 21-31.
    20. Umut UYAR & Sinem KANGALLI UYAR & Altan GOKCE, 2016. "Gosterge Faiz Orani Dalgalanmalari Ve Bist Endeksleri Arasindaki Iliskinin Esanli Kantil Regresyon Ile Analizi," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 16(4), pages 587-598.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:jjlobr:v:4:y:2015:i:1-2:p:115-125. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.