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Monetary policy and bank behavior: Empirical evidence from India

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  • Ghosh, Saibal

Abstract

The paper develops an empirical model to explore the role that bank characteristics play in influencing the monetary transmission process. Employing data on Indian commercial banks for the period 1992-2004, the findings indicate that for banks classified according to size and capitalization, a monetary contraction lowers bank lending, although large and well-capitalized banks are able to shield their loan portfolio from monetary shocks.

Suggested Citation

  • Ghosh, Saibal, 2006. "Monetary policy and bank behavior: Empirical evidence from India," MPRA Paper 17395, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17395
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    References listed on IDEAS

    as
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    4. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    5. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
    6. Carlo A. Favero & Francesco Giavazzi & Luca Flabbi, 1999. "The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks' Balance Sheets," NBER Working Papers 7231, National Bureau of Economic Research, Inc.
    7. International Monetary Fund, 2005. "Monetary Policy and Corporate Behavior in India," IMF Working Papers 2005/025, International Monetary Fund.
    8. Taylor, John B, 2000. "Alternative Views of the Monetary Transmission Mechanism: What Difference Do They Make for Monetary Policy?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 16(4), pages 60-73, Winter.
    9. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
    10. Joe Peek & Eric Rosengren, 1995. "Bank lending and the transmission of monetary policy," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 39, pages 47-79.
    11. Nachane, D M & Narain, Aditya & Ghosh, Saibal & Sahoo, Satyananda, 2001. "Bank response to capital requirements: Theory and Indian evidence," MPRA Paper 17453, University Library of Munich, Germany.
    12. Kim, Hyun E., 1999. "Was the credit channel a key monetary transmission mechanism following the recent financial crisis in the Republic of Korea?," Policy Research Working Paper Series 2103, The World Bank.
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    Cited by:

    1. Kubendran NARAYANASAMY, 2020. "Banking Sector Reforms and the Goals of Nationalised Commercial Banks in India," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(623), S), pages 241-262, Summer.
    2. Asrat Tsegaye & Syden Mishi, 2012. "The Role of Banks in Monetary Policy Transmission in South Africa," Working Papers 295, Economic Research Southern Africa.
    3. 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.

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    More about this item

    Keywords

    monetary policy; banking; India;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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