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Monetary policy and informal finance: Is there a pecking order?

Saibal Ghosh and Rakesh Kumar

MPRA Paper from University Library of Munich, Germany

Abstract: The paper utilizes state-level data on household dependence on informal finance for an extended time span to examine whether it is impacted by a monetary contraction. The analysis suggests a substitution effect such that borrowing from moneylenders declines, whereas landlords and relatives turn out to be the preferred financing choices. In addition, the evidence also supports a hierarchy among these preferred financing choices. This suggests that monetary policy needs to take on board its impact on the hitherto neglected informal sector.

Keywords: informal finance; monetary policy; India (search for similar items in EconPapers)
JEL-codes: E52 O17 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-cba, nep-iue, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Economic and Political Weekly 24.50(2015): pp. 18-20

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