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Bank Lending and Monetary Transmission: Does Politics Matter?

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  • Saibal Ghosh

    (Qatar Central Bank)

Abstract

Combining bank-level data with information on interest rate subvention, the paper documents an expansion in agricultural lending and a reduction in interest costs even under tight monetary policy, in the presence of political intervention. The magnitude of the impact is asymmetric across periods of monetary expansion and contraction. The analysis highlights the importance of the government in the functioning of the credit market and uncovers a political channel of monetary transmission.

Suggested Citation

  • Saibal Ghosh, 2020. "Bank Lending and Monetary Transmission: Does Politics Matter?," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(2), pages 359-381, June.
    • Handle: RePEc:spr:jqecon:v:18:y:2020:i:2:d:10.1007_s40953-019-00190-y
    DOI: 10.1007/s40953-019-00190-y
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    Cited by:

    1. Ghosh, Saibal, 2022. "Elections and provisioning behavior: Assessing the Indian evidence," Economic Systems, Elsevier, vol. 46(1).
    2. Jugnu Ansari & Saibal Ghosh, 2021. "Monetary Policy Pass-through, Ownership and Crisis: How Robust is the Indian Evidence?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 15(4), pages 456-483, November.
    3. Saibal Ghosh, 2022. "Does financial interconnectedness affect monetary transmission? Evidence from India," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 15(3), pages 273-300, September.

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    More about this item

    Keywords

    Interest rate subvention; Bank lending; Monetary policy; India;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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