Interest Rate Determination in India: The Role of Domestic and External Factors
AbstractThis paper examines the determinants of interest rates in India in the post reform period in the context of a model that takes into account both domestic and external factors. The short- and long-run behaviour of interest rates (commercial paper rate, three-month Treasury bill rate, twelve-month Treasury bill rate) is studied. The empirical results are robust across interest rates and indicate the existence of a cointegrating relationship between real interest rates, real government expenditure, real money supply, foreign interest rates and the forward premium. The estimations also show that movements in interest rates are Granger caused by both domestic and external factors.
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Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 92.
Length: 30 pages
Date of creation: Jun 2001
Date of revision:
Find related papers by JEL classification:
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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