Theoretical and Applied Economics
No. 3 / 2021 (628), Autumn
Effectiveness of monetary policy and interest rate pass-through in India since financial sector reforms
NMIMS University, Mumbai, India
Abstract. This article tries to investigate how monetary policy and interest rate pass-through is effective in India after adequate autonomy was given to commercial banks through financial sector reforms and Banking Sector Reforms. The study uses Milton Friedman and Robert Mundell’s perspectives on the role of monetary policy in achieving internal and external sector equilibrium. For this purpose, the study uses ADF-PP unit root test, Engel Granger’s Causality Test and trend line analysis. The study observed that the monetary policy is effective in influencing major macroeconomic variables like GDP, Exports, Imports and Capital Flows. Similarly, the Reserve Bank’s Lending Rate and Commercial Banks Prime Lending Rates are directly correlated in the entire study period. But the study did not find any causality between money supply with current account deficit and exchange rate lacks significance of monetary policy in the context of automatic restoration in the external sector. The overall conclusion of the study is that the monetary policy is very effective in influencing major macroeconomic variables via strong interest rate pass-through in India even after adequate autonomy was given to Commercial Banking Institutions.
Keywords: Money Supply, Interest Rate, Monetary Policy, Capital Movements, Granger Causality.
Contents
- Two vital reference elements in the evolution of the current
model of European integration – The Maastricht Treaty
and the implementation of the single currency – Euro
Alin Ioan CREŢU
Alina Ștefania CHENIC
- Development in Romania during the post-crisis period:
A human, economic and social perspective
Maria-Daniela TUDORACHE
- Multifactorial analysis of the price formation in the terms
of a risk-free rate
Constantin ANGHELACHE
Mădălina-Gabriela ANGHEL
Iulian RADU
- Financial contracts with several types of agents
Laura CONSTANTIN
Ștefan Virgil IACOB
Dana Luiza GRIGORESCU
- Evaluation of the methodological relationship
between real business cycle model and macroprudential policy
Ayşegül Ladin SÜMER
- Efficiency of commercial banks in India
after global financial crises
K. RAVIRAJAN
K.R. SHANMUGAM
- Effectiveness of monetary policy and interest rate
pass-through in India since financial sector reforms
N. KUBENDRAN
- FDI and ODA effects on recipient countries imports:
Evidence from selected MENA countries
Mahmoud M. SABRA
- Estimating the relationship between governance,
economic growth, inequality and poverty
Mohammed TOUITOU
Ahmed BOUDEGHDEGH
- Environmental Kuznets curve and India:
Evidence from autoregressive distributed lag model
Jaganath BEHERA
- Rural urban migration with heterogeneous firms,
heterogonous laborer and the effect of wage subsidy
Sravaitri CHAUDHURI
Ranajoy BHATTACHARYYA
Sukanta BHATTACHARYA
- The relationship between exchange rates,
foreign trade and economic growth:
An application on Turkey
Çiğdem ALIM
Necati Alp ERILLI