Incomplete reform or opportunity: the role of the banking sector in the credit transmission mechanism in India
AbstractThe recent financial crisis in developed economies is attributed to the credit crunch and features of a free market economy. One main concern is the spreading of this crisis to emerging economies. This paper tests the importance of the banking sector as a credit transmission channel in India. The empirical analysis discovers a structurally stable long-run relationship (immune to exogenous shocks) between bank credit and interest rate spread. This suggests that the reform process has not yet reached an extent where capital markets are fully competitive and banks' role in credit formation remains significant, suggesting India's reduced exposure to the current financial crisis.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Journal of Economic Policy Reform.
Volume (Year): 11 (2008)
Issue (Month): 4 ()
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Other versions of this item:
- Anurag Sharma, 2008. "Incomplete reform or opportunity: the role of the banking sector in the credit transmission mechanism in India," Journal of Policy Reform, Taylor and Francis Journals, vol. 11(4), pages 273-288.
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